A person buys a bond with a face value of $10,000 for $9,325.Each year until the maturity date the bond buyer receives a coupon payment of $650 from the issuer of the bond.The coupon rate on the bond is
A) 9.11 percent.
B) 6.5 percent.
C) 7.0 percent.
D) 6.75 percent.

Question

Quizplus · Accepted Answer

The coupon rate is calculated by dividing the annual coupon payment by the bond's face value. Here, the annual coupon payment is $650, and the bond's face value is $10,000. Therefore, the coupon rate is $650 / $10,000 = 0.065, or 6.5 percent.

A Person Buys a Bond with a Face Value of $10,000