A university issues a bond with a face value of $10,000 and a coupon rate of 5.65% that matures on 07/15/2015.The holder of such a bond receives coupon payments of $282.50.How frequently are coupon payments made in this case?

Question

Quizplus · Accepted Answer

We can calculate the number of coupon payments using the formula:
Number of coupon payments = (total number of years) x (frequency of coupon payments per year)
Here, the bond matures on 07/15/2015, so the total number of years is:
2015 - 2019 (since the bond matures in 2015) = 4 years
Let's assume the frequency of coupon payments is x. Then, we can set up the following equation:
4 = 1/x
Solving for x, we get:
x = 4
This means that there are 4 coupon payments in total, which are made over a period of 4 years. Since the options given are monthly, quarterly, semiannually, and annually, the best choice is C, which stands for semiannually. Therefore, the bondholder receives 2 coupon payments per year, each for an amount of $282.50.

A University Issues a Bond with a Face Value of $10,000