Question

Issuers of coupon bondsmake a single payment of principal when the bonds matures, but multiple payments of interest over the life of the bond.make a single payment of interest and principal.make multiple payments of principal, but a single payment of interest.make a single payment of principal at the time the bond is issued and multiple payments of interest over the life of the bond.You purchase a two-year $1000 face value bond at par. The bond has a 6% coupon rate.However, do to cashflow problems, the company misses the first coupon payment, but pays both coupons payments in year 2. What is your rate of return?0.05830.06530.03000.06000.0428

Answer 1

Answer:Make a single payment of principal when the bonds matured but multiple payment of interest over the life of the bond.

2.0600

Explanation:

Bonds normally has a life of span from one upward for which interest will be paid to the investors as compensation for use of their fund and the principal sum will be refunded on the expiration of the bond life.

The return on a bond is fixed as specified in the bond contract the inability to make payment as at when due may not affect the return obtainable from the bond initial contract.