Question

Amanda purchased a 30 year $10,000 bond at par value with a 4% coupon. What is the total value of the coupons

Answer 1

To calculate the value of each coupon of the bond we multiply the nominal value by the interest rate.

That is to say:

`Coupon = Nominal value (Vn) * coupon rate (interest rate)`

`Coupon = $10 000 * 0.04 = $400`

That is the payment what to he receive annually.

After 30 years, Amanda will have received:

`$400*30 = $12 000`

Answer 2

Amanda purchased a 30 year $10,000 bond at par value with a 4% coupon.

We find the coupon amount each year

Coupon amount = actual amount of bond * 4%

= 10,000 * 0.04 = 400

Coupon amount for every year = 400

Total value of coupons for 30 years = 400 * 30 = 12000

$12,000 is the total value of the coupons