Question

Determine the interest payment for the following three bonds: 5.5 percent coupon corporate bond (paid semi-annually), 6.45 percent coupon Treasury note, and a corporate zero coupon bond maturing in 10 years. (Assume a $1,000 par value.)

Answer 1

Answer:

Interest payment = Interest rate per period × par value

5.5 percent coupon corporate bond (paid semi-annually)

Interest payment = 1/2 × 0.055 × 1000 = $27.5

6.45 percent coupon Treasury note (Treasury makes semi-annual coupons)

Interest payment = 1/2 × 0.0645 × 1000 = $32.25

Zero coupon bond:

Interest = 0 × 1000 = $0