How to Calculate Semi-Annual Bonds

by Michael Keenan

Companies sometimes issue bonds when they need to raise money. Bonds function similar to loans, except that individual investors may buy parts of the loan and receive interest payments over a specified amount of time before the entire principal is repaid. Semi-annual bonds make two interest payments per year. To figure the amount of interest paid, you must know the par value of the bond and the annual interest rate. The price that you paid for the bond does not affect the amount of each interest payment.

1. Divide the annual interest rate by 2 to find the semi-annual interest rate. For example, if the bond pays an annual interest rate of 9.8 percent, divide 9.8 by 2 to get a semi-annual interest rate of 4.9 percent.

2. Multiply the result by 0.01 to convert the percentage to a decimal. In this example, multiply 4.9 by 0.01 to get 0.049.

3. Multiply the result by the par value of the bond. The par value is also known as the face value of the bond. In this example, if the bond has a par value of $5,000, multiply $5,000 by 0.049 to find that the semiannual interest payments on the bond equals $245.

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