A bond pays semiannual interest of $40.00;thus,its coupon rate is

Question

Quizplus · Accepted Answer

The coupon rate is calculated by dividing the annual interest payments by the face value of the bond. Since the bond pays semiannual interest of $40.00, the annual interest payments are $80.00 ($40.00 x 2).

Let's assume that the face value of the bond is $1,000. Then, the coupon rate is:

Coupon Rate = Annual Interest Payments / Face Value
Coupon Rate = $80 / $1,000
Coupon Rate = 8.00%

Therefore, the correct answer is C, with a coupon rate of 8.00%.

A Bond Pays Semiannual Interest of $40