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Chapter 16: Problem 3

If the face value of a bond is \(\$ 10,000\) and the annual coupon payment is \(\$ 600\) then what is the coupon rate?

Short Answer

Expert verified
The coupon rate of the bond is 6%.

Step by step solution

01

Identify known quantities

The face value of the bond is $10,000 and the annual coupon payment is $600.
02

Apply the formula for Coupon Rate

The formula to calculate the coupon rate is: Coupon Rate = (Annual Coupon Payment / Face Value of the Bond) x 100.
03

Insert the known values into the formula

Substitute the given values into the formula: Coupon Rate = (600 / 10,000) x 100.
04

Solve for Coupon Rate

Perform the division first, then multiply by 100 to get the percentage. The coupon rate equals 6%.

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