An investor holds a Ford bond with a face value of $5000,a coupon rate of 4%,and semiannual payments that matures on 01/15/2009.How much will the investor receive on 01/15/2009?

Question

Quizplus · Accepted Answer

The bond has a coupon rate of 4%, which means that the investor will receive 4% of the face value every six months. Since the bond matures on 01/15/2009, there will be one final coupon payment on that date. The coupon payment is calculated as follows:
Coupon payment = (Coupon rate x Face value) / 2
Coupon payment = (4% x $5000) / 2 = $100
In addition to the final coupon payment, the investor will receive the face value of the bond on the maturity date, which is also $5000. Therefore, the total amount the investor will receive on 01/15/2009 is:
Total amount = Final coupon payment + Face value
Total amount = $100 + $5000 = $5100

An Investor Holds a Ford Bond with a Face Value