The 6.4 percent bond of Berberich, Inc.has a yield to maturity of 6.9 percent.The bond matures in eleven years, has a face value of $1,000, and pays semiannual interest payments.What is the amount of each coupon payment?

Question

Quizplus · Accepted Answer

The bond has a 6.4% annual coupon rate, which means it pays 6.4% of its face value in interest each year. The face value is $1,000, so the annual coupon payment is 6.4% of $1,000, which is $64. Since the bond pays interest semiannually, each coupon payment is $64/2 = $32.00.

The 64 Percent Bond of Berberich, Inc