Question

Which one of the following statements about vanilla bonds is NOT true?

A) They have fixed coupon payments.
B) The face value, or par value, for most corporate bonds is $1,000.
C) Coupon payments are usually made quarterly.
D) The bond's coupon rate is calculated as the annual coupon payment divided by the bond's face value.

Answer 1

The correct answer is D) The bond's coupon rate is calculated as the annual coupon payment divided by the bond's face value.

Step-by-step explanation:

The correct answer to the question is D) The bond's coupon rate is calculated as the annual coupon payment divided by the bond's face value.

In vanilla bonds, the coupon rate is calculated as the annual coupon payment divided by the face value of the bond. It represents the interest rate that the bondholder will receive annually.

Bonds usually have fixed coupon payments, meaning that the amount of interest paid to the bondholder remains the same throughout the bond's life. The face value for most corporate bonds is $1,000. Coupon payments can be made quarterly, semi-annually, or annually, depending on the terms of the bond.