A five-year treasury bond with a coupon rate of 6% has a face value of $2,000. What is the semiannual coupon payment? Round the final answer to the whole integer.
Question
A five-year treasury bond with a coupon rate of 6% has a face value of $2,000. What is the semiannual coupon payment? Round the final answer to the whole integer.
Solution
The semiannual coupon payment is calculated as follows:
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First, we need to understand that the coupon rate is annual, but the bond pays semiannually. So, we need to divide the coupon rate by 2 to get the semiannual coupon rate.
So, the semiannual coupon rate is 6% / 2 = 3%.
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Next, we calculate the semiannual coupon payment by multiplying the semiannual coupon rate by the face value of the bond.
So, the semiannual coupon payment is 3% of 60.
Therefore, the semiannual coupon payment is $60.
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