A bond is quoted as a 6.5% coupon. The par value of the bond is $1,000, and the market value is $1,200. The bondholder would receive _____ in interest per year.

Question

Quizplus · Accepted Answer

The coupon rate of the bond is 6.5%, which means that the bondholder will receive an annual interest payment of 6.5% of the par value of the bond. Therefore, the bondholder will receive $65 in interest per year (6.5% x $1,000). The market value of the bond is irrelevant to the calculation of the interest payment.

A Bond Is Quoted as a 6