Question

Please show work so I can follow. Thank you.

1. Calculate the single and annual coupon payments assuming the following:
   1. Semiannual bond, Coupon rate of 8 percent, Par value of $1,000:
   2. Annual bond, Coupon rate of 4.5 percent, Par value of $100:
   3. Monthly bond, Coupon rate 12 percent, Par value $850:

Answer 1

(a)-Semiannual bond, Coupon rate of 8 percent, Par value of $1,000

Single Coupon Payment (Semi-annual coupon payment) = Par Value x Coupon Rate x ½

= $1,000 x 8% x ½

= $40

Annual Coupon Payment = Semi-annual coupon payment x Number of compounding period

= $40 x 2

= $80

(b)-Annual bond, Coupon rate of 4.5 percent, Par value of $100

Single Coupon Payment = Par Value x Annual Coupon Rate

= $100 x 4.50%

= 4.50

Annual Coupon Payment = Single coupon payment x Number of compounding period

= $4.25 x 1

= $4.25

(c)-Monthly bond, Coupon rate 12 percent, Par value $850

Single Coupon Payment (Monthly coupon payment) = Par Value x Coupon Rate x 1/12

= $850 x 12% x 1/12

= $8.50

Annual Coupon Payment = Monthly coupon payment x Number of compounding period

= $8.50 x 12 Months

= $102