Suppose that Ford issues a coupon bonds at a price of $1,000, which is the same

Question

Suppose that Ford issues a coupon bonds at a price of $1,000, which is the same as the bond's par value. Assume the bond has a coupon rate of 4%, pays the coupon once per year, and has a maturity of 30 years. If an investor purchased this bond at the price of $1,000, for each year except the last year, the investor would receive a payment of S 40 (Round your answers to the nearest dallar.) When the bond matures, the investor would receive a final payment of S. (Round your answers to the nearest dollar.)

Explanation / Answer

Annual coupon amount = (Face Value of bond x Coupon rate) / No. of coupon payments annually

= ($ 1,000 x 4 %)/1 = $ 1,000 x 0.04 = $ 40

On maturity of bond, the investor will get the face amount $ 1,000 as final payment.

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