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borishaifa [10]
3 years ago
5

Fred purchases a bond, newly issued by the Big Time Corporation, for $10,000. The bond pays $400 to its holder at the end of the

first, second, and third years and pays $10,400 upon its maturity at the end of four years. The principal amount of this bond is ___, the coupon rate is ____, and the term of this bond is _____.
A. $400 ; 40%; four years
B. $10,000; 4%; four years
C. $10,000; $400; 4% D. $10,400; 4%; four years
Business
1 answer:
VashaNatasha [74]3 years ago
4 0

Answer: The correct answer is "B. $10,000; 4%; four years".

Fred purchases a bond, newly issued by the Big Time Corporation, for $10,000. The bond pays $400 to its holder at the end of the first, second, and third years and pays $10,400 upon its maturity at the end of four years. The principal amount of this bond is <u>$10000,</u> the coupon rate is <u>4%,</u> and the term of this bond is <u>four years.</u>

<u></u>

Explanation: The maturity of the bond is at 4 years.

Its future value or face value is 10000.

The coupon rate is equal to \frac{Cupon}{Face value} x 100

So Coupon rate = \frac{400}{10000} x 100 = 4%

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