Question

You are considering purchasing a 10% coupon bond that has a maturity of five years and is sold at a yield of 12%. The bond has a $1000 par value. If the bond makes semi-annual interest payments, what price should you pay for this bond?

Answer 1

Answer:

Bonds have maturity dates at which point the principal amount must be paid back in ... For example, a 5% coupon rate means that bondholders will receive 5% x $1000 face value = $50 ...