A person buys a bond with a face value of $10,000 for $9,195. Each year until the maturity date the bond buyer receives a coupon payment of $450 from the issuer of the bond. The coupon rate on the bond is

Question

Quizplus · Accepted Answer

The coupon rate is calculated by dividing the annual coupon payment by the bond's face value. Here, the annual coupon payment is $450, and the bond's face value is $10,000. Therefore, the coupon rate is $450 / $10,000 = 0.045, or 4.5 percent.

A Person Buys a Bond with a Face Value of $10,000