Question

What is the par value of a corporate bond that was issued with an 9% annual coupon, pays $45 in semiannual interest, and is due in 15 years

Answer 1

$1,000

Step-by-step explanation:

A bond's par value is the bond's face value or maturity value. This is the amount that the bondholder will collect once the bond matures. The coupon is calculated by multiplying the bond's par value times the coupon rate (interest rate). In this case, the coupon rate is 9% / 2 = 4.5% because it pays a semiannual coupon.

coupon = bond's par value x coupon rate

$45 = bond's par value x 4.5%

bond's par value = $45 / 4.5% = $1,000