Asked by Clayton Carter on May 02, 2024
Verified
A bond with a 7% coupon that pays interest semi-annually and is priced at par will have a market price of _____ and interest payments in the amount of _____ each.
A) $1,007; $70
B) $1,070; $35
C) $1,070; $70
D) $1,000; $35
E) $1,000; $70
Coupon
The interest rate on a bond, usually expressed as a percentage of the face value and paid at regular intervals.
Semi-Annually
A period or process that occurs twice each year.
- Assess the pricing and profitability of bonds within different cases.
Verified Answer
ZK
Zybrea KnightMay 04, 2024
Final Answer :
D
Explanation :
A bond priced at par means its market price is equal to its face value, which is typically $1,000. With a 7% annual coupon rate and semi-annual payments, the interest payment every six months would be half of 7% of $1,000, which is $35.
Learning Objectives
- Assess the pricing and profitability of bonds within different cases.
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