If the principal amount of a bond is $10,000,000, the coupon rate is 7 percent, and the inflation rate is 4 percent, then the annual coupon payment made to the holder of the bond is:

Question

Quizplus · Accepted Answer

The coupon rate is not directly connected to the inflation rate. In this case, the annual coupon payment is $700,000, which is the principle times the annual interest rate, i.e., $10,000,000 × 0.07 = $700,000.

If the Principal Amount of a Bond Is $10,000,000, the Coupon