Assume that a bond will make payments every six months as shown on the following timeline (using six-month periods): Pe...

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Assume that a bond will make payments every six months as shown on the following timeline (using six-month periods): Period 4

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Answer 1

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Answer #1

a) Payment is made in every 6 months. And 50 such payments are made.

So maturity = 50/2 = 25 years

b) Coupon rate = Annual Coupon/Face Value

Coupon Rate = (2 * $19.13)/$1000 = $38.26/$1000 = 3.83%

c) Face Value is the amount that is returned back at maturity. Clearly, in the chart above, in period 50th, apart from $19.13 regular payment, $1000 is paid back and hence that is the face value.

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Answer 2

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