How much will each coupon payment be of a 20-year $500 bond with a 10% coupon rate and quarterly payments?

Question

Quizplus · Accepted Answer

The bond has a face value of $500 and a coupon rate of 10%, which means the annual coupon payment is $50 ($500 x 0.10). Since the payments are quarterly, there will be 20 x 4 = 80 coupon payments over the life of the bond. To calculate the quarterly coupon payment, we divide the annual coupon payment by 4: $50/4 = $12.50. Therefore, each coupon payment will be $12.50, or $50 per year. Answer B is the correct choice.

How Much Will Each Coupon Payment Be of a 20-Year