Question

1. A 10-year corporate bond has a coupon rate of 6% with semi-annual payments. How much is the par value of this bond?

2. A 10-year corporate bond has a coupon rate of 6% with annual payments. How much in interest does the bondholder receive per year?

3. A 10-year corporate bond has a coupon rate of 6% with semi-annual payments. How much in interest does the bondholder receive per year and per interest payment?

Answer 1

a.	$       1,000
Par value normally is the face value of bond which is $ 1000.
b.	$             60
Working:
Interest per year	=	Face value	*	Interest rate per year
	=	$       1,000	*	6%
	=	$             60
c.	Interest per year	$             60
	Interest per interest payment	$             30
Working:
Interest per interest payment	=	Face value	*	Interest rate per interest payment
	=	$       1,000	*	3%
	=	$             30
Interest per year	=	Interest per interest payment	*	Number of interest payment in a year
	=	$             30	*	2
	=	$             60