Question

What happens to the coupon rate of a $1,000 face value bond that pays $80 annually in interest if market interest rates change from 9% to 10%

Answer 1

C) The coupon rate remains at 8%

Step-by-step explanation:

Here are the options to this question :

A) The coupon rate decreases to 8%

B) The coupon rate increases to 10%

C) The coupon rate remains at 8%

D) The coupon rate remains at 9%

A bond is a debt instrument. Bond holders receive fixed coupon payments.

the coupon payments do not vary with market interest rate. It remains fixed based on the rate set on the bond indenture.

If the coupon payment is $80 and the face value of the bond is $1000, the coupon payment is 8%. the coupon rate remains fixed at 8%