An investor purchases a corporate bond with a par value of $1000, a 10-year term, and...
An investor purchases a corporate bond with a par value of $1000, a 10-year term, and a coupon rate of 7%. If this investor plans to hold this bond until the maturity date, how much can the investor expect to earn yearly?
a) 7% + the prime rate
b) The prime rate
c) $1000, or the face value
d) The current federal treasury rate
e) 7% coupon rate
Homework Answers
e) 7% coupon rate
the above is answer..
because investor purchased the bond at the par value and we also know that value of the bond on maturity is the par value, so there is no capital gain by holding the par value till maturity. This means only return is from interest income earned in the form of coupon rate which is 7% in this case
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