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A bond is priced at $1,100, has 10 years remaining until maturity, and has a 10% coupon, paid semiannually. The amount of the next interest payment is $50
The coupon rate is the fixed annual fee at which assured-income security, generally a bond, will pay its holder or owner. it's far primarily based on the face fee of the bond at the time of trouble, otherwise referred to as the bond's “par value” or predominant.
To calculate the amount of the next interest payment use the formula Coupon payment = Coupon rate * par value
According to the question Par value = $1,000; Price = $1,100; n(time) = 10 years
Coupon rate 10% adjusted for semi-annual payment = 10% / 2 = 0.05
Coupon payment = Coupon rate * par value
Coupon payment = 0.05 * 1,000
Coupon payment = $50
A bond is an instrument used to borrow a price range from investors known as bondholders. The company of the bond may be an organization or the authorities and is predicted to pay the bondholder periodic coupons and the par fee at maturity. Those bills are beneficial inside the computation of the charge of a bond. The coupon payments are calculated based on the coupon charge as a percent of the par fee. it's miles crucial to element within the compounding frequency of the coupon charge.
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