Question

You purchase 4,500 bonds with a par value of $1,000 for $977 each. The bonds have a coupon rate of 9.8 percent paid semiannually and mature in 10 years. How much will you receive on the next coupon date? How much will you receive when the bonds mature?

Answer 1

To calculate the next coupon amount, multiply the par value by the coupon rate and divide by the number of coupon payments per year. To calculate the maturity amount, multiply the par value by the coupon rate and add the par value.

Step-by-step explanation:

To calculate the amount you will receive on the next coupon date, multiply the par value ($1,000) by the coupon rate (9.8%) and divide by the number of coupon payments per year (2).

Next Coupon Amount = ($1,000 * 9.8%) / 2 = $49

To calculate the amount you will receive when the bonds mature, multiply the par value ($1,000) by the coupon rate (9.8%) and add the par value.

Maturity Amount = $1,000 + ($1,000 * 9.8%) = $1,098