A bond has a face value of $1,000 and an annual interest payment of $44. What is its coupon rate and what would its yield be if the bond sold for $1,100 in the secondary bond market?
A) 44% and 4.4%, respectively
B) 4.4% and 4.0%, respectively
C) 4.0% and 4.4%, respectively
D) 4.4% and 10%, respectively

Question

Quizplus · Accepted Answer

The coupon rate is calculated as the annual interest payment divided by the face value, which is $44/$1,000 = 4.4%. The yield is calculated as the annual interest payment divided by the current market price, which is $44/$1,100 = 4.0%.

A Bond Has a Face Value of $1,000 and an Annual