A bond has a $1 000 face value, 10 years to maturity, and 7% semi-annual coupon payments. What would be the expected difference in this bond's price immediately before and immediately after the next coupon payment?

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Quizplus · Accepted Answer

The expected difference in the bond's price immediately before and immediately after the next coupon payment would be the amount of the coupon payment itself, which is $35 (7% of $1000 = $70 annual interest, and since payments are semi-annual, $70/2 = $35).

A Bond Has a $1 000 Face Value, 10 Years