Question

Suppose we know that the coupon for TAMIU bond is $50, and each TAMIU bond has face value of $1,000, maturity is November 15, 2017. With all the information we can calculate the coupon rate for the TAMIU bond is:

A-2%

B-3%

C-4%

D-5%

Answer 1

coupon payment = 50

Face value = 1000

Coupon rate = Coupon payment / Face value = 50 / 1000 = 0.05 = 55

Option D is correct

Answer 2

To calculate the coupon rate for the TAMIU bond, we need to divide the annual coupon payment by the face value of the bond and express it as a percentage.

Given: Coupon payment (C) = $50 Face value (FV) = $1,000

Coupon rate (CR) = (Coupon payment / Face value) * 100%

CR = ($50 / $1,000) * 100%

CR = 5%

Therefore, the coupon rate for the TAMIU bond is 5%. The correct option is D-5%.