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The rate at which bonds pay semi-annual interest payments to the bond holders is the:Group of answer choicesGrowth RateCoupon RateDiscount RateMarket Rate

Question

The rate at which bonds pay semi-annual interest payments to the bond holders is the:

  • Group of answer choices
  1. Growth Rate
  2. Coupon Rate
  3. Discount Rate
  4. Market Rate
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Solution

Understanding the Terminology

  1. Growth Rate: This refers to the rate at which an investment or economic indicator is expected to increase over time, often relating to dividends or capital gains, rather than interest payments.

  2. Coupon Rate: This is the fixed annual interest rate paid by the bond issuer to the bondholders, expressed as a percentage of the bond's face value. Since the question specifies "semi-annual interest payments," this is the most relevant term.

  3. Discount Rate: This is the interest rate used to determine the present value of future cash flows, including bonds, which is not directly related to the payments to bond holders.

  4. Market Rate: This refers to the current yield of bonds in the market and can be different from the coupon rate, reflecting current market conditions.

Conclusion

The correct answer is Coupon Rate, as it specifically refers to the interest payments made to bondholders, paid semi-annually as per the structure of many bonds.

This problem has been solved

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