Questions: For a 5-year bond with a face value of 1,000 and a 6% annual coupon rate, what would be the semi-annual interest payment? a. 60 b. 100 c. 30 d. 50

Solution Steps

We are given a 5-year bond with a face value of \$1,000 and a 6% annual coupon rate. We need to determine the semi-annual interest payment.

The annual interest payment is calculated by multiplying the face value of the bond by the annual coupon rate:

\[ \text{Annual Interest Payment} = \text{Face Value} \times \text{Coupon Rate} = 1000 \times 0.06 = 60 \]

Since the interest is paid semi-annually, we divide the annual interest payment by 2:

\[ \text{Semi-Annual Interest Payment} = \frac{\text{Annual Interest Payment}}{2} = \frac{60}{2} = 30 \]

Final Answer