Question

Please use the following baseline information:

Company ABC is offering bonds to investors to pay for its corporate expansion.
Par value: $1,000 per bond
Coupon rate: 5 percent per year (fixed rate)
Maturity: 10 years

At the end of 10 years, the bondholder would have received the following amount in total:
$15,000.
$1,000.
$5,000.
$1,500.

(I know it’s not $5,000)

Answer 1

The total amount an investor would receive at the end of 10 years if they buy a bond with a par value of $1,000 and a coupon rate of 5% per year is $1,500.

Step-by-step explanation:

The question is asking how much an investor would receive at the end of 10 years if they buy a bond with a par value of $1,000 and a coupon rate of 5% per year. To calculate the total amount received, we need to consider the coupon payments and the return of the principal amount at maturity. The coupon payment per year would be $1,000 × 0.05 = $50. Over 10 years, the total coupon payments would be $50 × 10 = $500. Adding the principal amount, the total amount received would be $500 + $1,000 = $1,500.

Answer 2

The coupon rate would have been 5 percent, which means the bond would have paid out the full $15,000 over 10 years.

Step-by-step explanation: