A 3% coupon rate bonds issued in Australia pays couponsA.$30 twice a yearB.$3 once a yearC.$1.5 twice a yearD.$6 in total per year
Question
A 3% coupon rate bonds issued in Australia pays coupons
- A. $30 twice a year
- B. $3 once a year
- C. $1.5 twice a year
- D. $6 in total per year
Solution
The coupon rate of a bond is the annual interest rate the issuer will pay to the bondholder. It's expressed as a percentage of the bond's face value.
In this case, the bond has a coupon rate of 3%. This means that for every 3 in interest per year.
Let's go through the options:
A. 1000 (because 1000) and the issuer is paying interest semi-annually. This is possible if the bond's terms specify semi-annual payments.
B. 100 (because 100) and the issuer is paying interest annually. This is possible if the bond's terms specify annual payments.
C. 100 (because 100) and the issuer is paying interest semi-annually. This is possible if the bond's terms specify semi-annual payments.
D. 200 (because 200) and the issuer is paying interest annually. This is possible if the bond's terms specify annual payments.
So, all of the options could be correct depending on the face value of the bond and the frequency of the interest payments.
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