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9 October, 20:24

A bond has a par value of $1,000, a current yield of 7.17 percent, and semiannual coupon payments. The bond is quoted at 104.68. What is the amount of each coupon payment?

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  1. 9 October, 22:10
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    Each payment = $37.52778

    Explanation:

    Given:

    Bond value = $1,000

    Current yield = 7.17% = 0.0717

    Bond quoted = 104.68%

    Payment method = Semi-annual = 2 payment

    Computation of annual coupon amount:

    Current yield = Annual coupon / (Bond value * Bond quoted)

    0.0717 = Annual coupon / ($1,000 * 104.68%)

    0.0717 = Annual coupon / ($1,046.8)

    Annual coupon = 0.0717 * $1,046.8

    Annual coupon = $75.05556

    Computation of each payment:

    Each payment = Annual coupon amount / 2 payment

    Each payment = $75.05556 / 2

    Each payment = $37.52778
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