Zack owns a bond that will pay him $35 each year in interest plus a $1,000 principal payment at maturity.The $1,000 principal payment is called the:
A) coupon.
B) par value.
C) discount.
D) yield.
E) call premium.
F) None of the above.

Question

Quizplus · Accepted Answer

The $1,000 principal payment is called the par value, which is the face value of the bond and the amount that the issuer promises to pay at maturity. The coupon is the annual interest payment on the bond, while the discount is the difference between the market price of the bond and its par value. Yield is a measure of the return on the bond that takes into account both the annual interest payment and any capital gains or losses when the bond is sold. Call premium is the extra amount that an issuer may pay to call a bond before maturity. None of these terms accurately describe the $1,000 principal payment.

Zack Owns a Bond That Will Pay Him $35 Each