A corporate bond makes payments of $9.67 every month for ten years with a final payment of $2009.67. Which of the following best describes this bond?

Question

Quizplus · Accepted Answer

The bond makes monthly payments for ten years, meaning there are a total of 120 payments. The sum of the payments is $9.67 x 120 + $2009.67 = $3200.07. Therefore, using the formula for coupon rate, (annual coupon payment / face value) x 100%, we can solve for the coupon rate:
($9.67 x 12) / $2000) x 100% = 5.80%
Therefore, the correct choice is C, a 10-year bond with a face value of $2000 and a coupon rate of 5.8% with monthly payments.

A Corporate Bond Makes Payments of $9