The Government of Canada issues $50 million in 10-year, long-term bonds, of which $5 million...

The coupon is calculated on the $5 million face value actually purchased by the mutual fund trust , not on the entire $50 million government issue. A 4% annual coupon therefore produces annual interest of:

$5,000,000 × 4% = $200,000.

Because the bond pays interest semiannually , the annual coupon is divided into two equal payments:

$200,000 ÷ 2 = $100,000 .

The IFC material describes Government of Canada bonds as fixed-income securities that make regular coupon payments and specifically notes that government bonds generally provide interest payments semiannually. The 10-year maturity does not change the amount of each coupon payment; it determines how long those payments continue before the principal is returned. Therefore, the trust receives $100,000 after the first six months , making A correct.

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