Question

A bond has a par value of $1,000, a current yield of 7.02 percent, and semiannual coupon payments. The bond is quoted at 102.73. What is the amount of each coupon payment

Answer 1

Answer:

Annual coupon = $36.06

Explanation:

Par value = $1,000  (Face Value)

Current yield = 7.02%

The bond is quoted at 102.73

Current price of the bond = $1,027.30  (102.73 * $1,000)

Current yield = Annual coupon / P = 7.02%

Annual coupon = P x 7.02%

Annual coupon = $1,027.30 x 7.02%

Annual coupon = $72.12

Annual coupon (after considering semi-annual payment) = $72.12 / 2

Annual coupon = $36.06