Question

56) What is the coupon payment of a 25-year $1000 bond with a 4.5% coupon rate with quarterly payments? A) $3.75 B) $11.25 C) $22.50 D) $45.00

Answer 1

Answer:

Quarterly interest payment= $11.25

Explanation:

The coupon rate is the proportion of the nominal value of a bond that is paid as  interest . This proportion is always as a quoted as percentage . And the payment  can be made annually, semi-annually or even quarterly

Here the quarterly payment implies that the investor would receive the interest payment every three months

Annual Interest payment = coupon rate × nominal value

                       = 4.5% × 1,000 = 45

Quarterly interest payment = 45 × 3/12 =  11.25

Quarterly interest payment= $11.25