2,500 bonds with a term of five years, and a coupon rate of 7%, compounded annually, with payments once a year, and a face value of $1000, were issued November 1. What is the total amount that the company will have paid out at the bonds maturity?

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Quizplus · Accepted Answer

The total amount paid at maturity includes both the interest payments and the repayment of the principal. The annual interest payment per bond is 7% of $1000 = $70. Over 5 years, this totals $350 per bond. For 2,500 bonds, the interest payments total $350 * 2,500 = $875,000. The principal repayment is $1000 * 2,500 = $2,500,000. Adding these together, the total payout is $875,000 + $2,500,000 = $3,375,000.

2,500 Bonds with a Term of Five Years, and a Coupon