Question

4 A bond with a 7.0% coupon rate that pay e of each a nominal yield to maturity (APR) of s interest semi-annually and is priced at par has a market and interest payments in the amount of $1,070, 3.5%, and $35, respectively $1,070, 7.0%, and $70, respectively $1,000, 7.0% and $35, respectively $1,000, 3.5% and $70, respectively C. D. 2 points Your Answer

Answer 1

Answer:

Correct answer is:

C. $1,000, 7.0% and $35, respectively.

Explanation:

Given that bond is priced at par; hence market price is $1,000

Bond's issue price is same as par value. This implies that yield to maturity is equal to its coupon rate:

Yield to maturity = Coupon rate = 7%

Bond pays interest semiannually. Hence each of the Interest payment amount = $1,000 * 7% / 2 = $35

As such option C is correct and other options A, B and D are incorrect.