A bond is quoted as 6.5 percent coupon.The par value of the bond is $1,000,and the market value is $1,200.The bondholder would receive _____ interest per year.

Question

Quizplus · Accepted Answer

The bond is quoted as a 6.5% coupon, which means that the bondholder will receive 6.5% of the par value of $1,000 annually, or $65.

The fact that the market value of the bond is $1,200 does not affect the annual interest payment. It simply means that the bond is selling at a premium, because its coupon rate is higher than the prevailing market interest rate.

Therefore, the correct answer is (C) $65.

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