Determine the interest payment for the following three bonds
(Assume a $1,000 par value.) **(Leave no cells blank – be
certain to enter “0” wherever required. Round your answers to 2
decimal places)**:

4 ½ percent coupon corporate bond (paid semiannually) | $ |

5.15 percent coupon Treasury note | $ |

Corporate zero coupon bond maturing in 15 years | $ |

## Answer

Determine the interest payment: Assuming the par value of $1,000 per bond, the interest payment for each case can be determined as under (a) 4 ‘% percent coupon corporate bond (paid semiannually): It is given that the interest is paid semi-annually. Therefore, the interest rate would be half of the given interest rate. The interest payment is calculated by multiplying the par value of bond with the interest rate as shown below Interest payment -Par value x Rate of interest $1,000 x 4.5% x 1/2 $1,000 x 2.25% -$22.50 Hence, the interest payment is $22.50. (b) 5.15 percent coupon Treasury note: It is given that the interest is paid semi-annually. Therefore, the interest rate would be half of the given interest rate. The interest payment is calculated by multiplying the par value of bond with the interest rate as shown below: Interest payment -Par value x Rate of interest = $1,000 x 5.1590 x 1/2 $1,000 x 2.58% $25.75 Hence, the interest payment is $25.75.

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