Assume that a bond will make payments every six months as shown on the following

Question

Assume that a bond will make payments every six months as shown on the following timeline (using six-month periods): Period 19 20 Cash Flows $20.00 $20.00 $20.00 $20.00 $1,000 a. What is the maturity of the bond (in years)? b. What is the coupon rate (as a percentage)? c. What is the face value? a. What is the maturity of the bond (in years)? The maturity is years. (Round to the nearest integer.) b. What is the coupon rate (as a percentage)? The coupon rate is»96. (Round to two decimal places.) c. What is the face value? The face value is S(Round to the nearest dollar.)

Explanation / Answer

a. Maturity of bond is the time period between when the bond is issued and when it is matured. On maturity, bond is redeemed by paying face value or principal.

Here, maturity of bond is 10 years (20/2), timeline shows 20- 6months ie;10 years

b.Coupon rate = Annual Coupon payment/face value

=(20*2)/1000

=4%

c. Face value is $1,000 as it is repaid on maturity.(see timeline 20th period)

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