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 59 60 Cash Flows $19.29 $19.29 $19.29 $19.29$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 isyears. (Round to the nearest integer.) b. What is the coupon rate (as a percentage)? The coupon rate is %. (Round to two decimal places.) c. What is the face value? The face value is $11. (Round to the nearest dollar.)

Explanation / Answer

Interest is payable for every six months i.e. twice per a year

total payments are 60

Tenure is 60/2 = 30 years

interest payable for every six months is = 19.29 dollars

Interest per annum =19.29+19.29 =38.58 dollars

Generally face value of the bond is paid at the end of the period

In this case 1000 dollars are paid at time of 60th payment

Hence the face value of the bond is 1000 dollars

coupon rate = Interast per annum

Face value

Coupon rate = 38.58/1000 X 100

= 3.86%

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