Jason holds a bond with a par value of $1,000 issued by the Asbury Corporation that will mature in seven years. The coupon rate on the bond is 7 percent. He bought the bond for $900. Assuming Asbury lives up to its financial obligations and that he doesn't trade the bond, Jason can expect to receive $70 in interest from Asbury over the next year.

Question

Quizplus · Accepted Answer

This is true because the coupon rate is 7%, which means that Jason will receive 7% of the par value ($1,000) in interest payments each year. 7% of $1,000 is $70, which is the amount he can expect to receive in interest over the next year. As long as Asbury Corporation does not default on their financial obligations, Jason will receive this interest payment.

Jason Holds a Bond with a Par Value of $1,000