Question

A $1,000 face value coupon bond with a $60 coupon payment every year has a coupon rate of

a) .6 percent.
b) 5 percent.
c) 6 percent.
d) 10 percent.

Answer 1

The coupon rate of a bond is calculated by dividing the annual coupon payment by the bond's face value and multiplying by 100. For a bond with a $60 coupon payment and a $1,000 face value, the coupon rate is 6%.

The correct answer is c) 6 percent.

Step-by-step explanation:

The student has asked about the coupon rate of a bond. To calculate the coupon rate, you divide the annual coupon payment by the face value of the bond and then multiply by 100 to get a percentage. In this case, the bond has a $1,000 face value and a $60 annual coupon payment:

Coupon Rate = (Coupon Payment / Face Value) × 100

Coupon Rate = ($60 / $1,000) × 100

Coupon Rate = 0.06 × 100

Coupon Rate = 6%

Therefore, the correct answer is c) 6 percent.