Answered: You are purchasing a zero coupon bond.…

You are purchasing a zero coupon bond. This bond has an issue price of $800 and a Face Value of $1,000. If the Maturity of this bond is in five years, what is the Coupon Rate? 8.32% 4.19% 9.12% 4.56%

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter6: Fixed-income Securities: Characteristics And Valuation

Section: Chapter Questions

Problem 8P

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Concept explainers

Bond Valuation

Bond valuation are the notes issued by the corporation to raise long-term funds for the business. The corporations are required to pay the interest on such liabilities at a specified rate of interest (termed as coupon rate) at specified dates which may be on semi-annual or annual basis. These interest payments may be in the form of coupons.

Question

You are purchasing a zero coupon bond. This bond has an issue price of $800 and a Face Value of $1,000. If the Maturity of this bond is in five years, what is the Coupon Rate?

8.32%

4.19%

9.12%

4.56%

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