Company BOND, issued 1,000 bonds with par value of $500 and coupon rate of 10%. Interest on bonds is paid semi-annually and the bond will mature at the end of five years. How much interest will be paid on the third semi-annual payment if the bonds were issued at the prevailing interest rate of 8%?
Added by Savannah E.
Step 1
The coupon rate is 10% per year, so for semi-annual payments, it would be 10%/2 = 5% per payment. The coupon payment per bond would be 5% of the par value, which is $500. So, the semi-annual coupon payment per bond is 5% * $500 = $25. Since there are 1,000 Show more…
Show all steps
Your feedback will help us improve your experience
Supreeta N and 72 other Principles of Accounting educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Recommended Videos
Moerdyk Corporation's bonds have a 15-year maturity, a 7.25% semiannual coupon, and a par value of $1,000. The going interest rate (rd) is 5.00%, based on semiannual compounding. What is the bond's price?
Rahul M.
A firm has some bonds maturing in 7 years, with par value of $1,000. Those bonds make annual coupon payment of $70. The market interest rate on similar bonds is 8.5%. What is the bond's price?
Nick J.
Recommended Textbooks
Horngren’s Cost Accounting
Cost Accounting A Managerial Emphasis
Principles of Accounting Volume 1: Financial Accounting
Transcript
18,000,000+
Students on Numerade
Trusted by students at 8,000+ universities
Watch the video solution with this free unlock.
EMAIL
PASSWORD