Suppose you obtain a $1,300 T-note with a 9% annual rate, paid monthly, with maturity in 6 years. How much interest will be paid to you each month?
To calculate the monthly interest payment on a T-note, we need to use the formula:
Interest Payment = Principal Amount × Annual Interest Rate ÷ Number of compounding periods per year
In this case, the Principal Amount is $1,300, the Annual Interest Rate is 9%, and the T-note pays interest monthly, so the Number of compounding periods per year is 12.
Let's calculate the monthly interest payment:
Interest Payment = $1,300 × 9% ÷ 12
Interest Payment = $117
Therefore, the interest paid to you each month will be $117.