The semiannual, 12-year bonds of Tracey United are selling at par and have an effective annual yield of 4.6529%. What is the amount of each interest payment if the face value of the bonds is $1,000?

Question

Quizplus · Accepted Answer

The effective annual yield of 4.6529% corresponds to a nominal annual yield of approximately 4.6% when compounded semiannually. Therefore, the semiannual coupon rate is 2.3% (half of 4.6%). The interest payment is 2.3% of the $1,000 face value, which is $23.00.

The Semiannual, 12-Year Bonds of Tracey United Are Selling at Par