Question

A semi-annual coupon bond has a coupon of 7.0. What does this mean?

a.

You get $7 once a year

b.

You get $70 once a year

c.

You get $35 twice a year

d.

You get $70 twice a year

Answer 1

A bond is a instrument which represents debt for the issuers of the bond.  The issuer has to pay back the principal amount to the holder on maturity or required intervals as stated in bond covenants. The interest is paid on prespecified intervals at the rate decided in advance. The coupons means interest which can be fixed or floating.

Semi annual coupon bond means a bond which pays coupon/ interest semiannually or twice a year each after 6 months completion.

A semi-annual coupon bond has a coupon of 7.0

It means that there is bond which pays interest at a rate of 7% per year . ie If we consider Face value of the bond as $1000 then $35 has to be paid after each 6 months completion. $70 Total for the year.

The answer is

c.You get $35 twice a year