A 10-year semi-annual coupon bond with an $1000 par value pays an annual coupon rate of 6% and the market requires 8% APR. What is the appropriate coupon, time period, and discount rate respectively that needs to be used to correctly value this bond? a. $30, 20, & 4% b. $60, 10, & 8% c. $30, 10, & 4% d. $30, 20, & 8%

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Butter

11 January, 09:15

A 10-year semi-annual coupon bond with an $1000 par value pays an annual coupon rate of 6% and the market requires 8% APR. What is the appropriate coupon, time period, and discount rate respectively that needs to be used to correctly value this bond? a. $30, 20, & 4% b. $60, 10, & 8% c. $30, 10, & 4% d. $30, 20, & 8%

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Vanessa Gamble · Answer 1

d. $30, 20, & 8%

Explanation:

Appropriate coupon = $1000*6%*1/2

= $30

Then, the time period is:

Time period = 10*2

=20 years

Discount rate = 8%

Therefore, The appropriate coupon, time period, and discount rate are $30, 20 and 8% respectively.