Question

determine interest payment for the following three bonds. (assume a 1000 value)3.45 % coupon corporate bond( paid semiannually),4.20% coupon treasury note, coorporate zero- coupon bond maturing in 10 years

Answer 1

Bond 1:

Par Value = $1,000
Annual Coupon Rate = 3.45%

Semiannual Coupon Rate = Annual Coupon Rate / 2
Semiannual Coupon Rate = 3.45% / 2
Semiannual Coupon Rate = 1.725%

Interest Payment = Par Value * Semiannual Coupon Rate
Interest Payment = $1,000 * 1.725%
Interest Payment = $17.25

Bond 2:

Par Value = $1,000
Annual Coupon Rate = 4.20%

Semiannual Coupon Rate = Annual Coupon Rate / 2
Semiannual Coupon Rate = 4.20% / 2
Semiannual Coupon Rate = 2.10%

Interest Payment = Par Value * Semiannual Coupon Rate
Interest Payment = $1,000 * 2.10%
Interest Payment = $21.00

Bond 3:

Par Value = $1,000
Annual Coupon Rate = 0.00%

Semiannual Coupon Rate = Annual Coupon Rate / 2
Semiannual Coupon Rate = 0.00% / 2
Semiannual Coupon Rate = 0.00%

Interest Payment = Par Value * Semiannual Coupon Rate
Interest Payment = $1,000 * 0.00%
Interest Payment = $0.00