Question

A 10-year semi-annual coupon bond with an $1000 par value pays an annual coupon rate of 6% and the market requires 8% APR. What is the appropriate coupon, time period, and discount rate respectively that needs to be used to correctly value this bond? a. $30, 20, & 4% b. $60, 10, & 8% c. $30, 10, & 4% d. $30, 20, & 8%

Answer 1

Answer:

d. $30, 20, & 8%

Explanation:

Appropriate coupon = $1000*6%*1/2

                                  = $30

Then, the time period is:

Time period = 10*2

                    =20 years

Discount rate = 8%

Therefore, The appropriate coupon, time period, and discount rate are $30, 20 and 8% respectively.