CFA Level I · CFA Level I Exam · Fixed-Income Instrument Features
A 5-year bond has a par value of EUR 1,000 and pays a 6% annual coupon in two equal semiannual payments. The amount of each coupon payment is closest to:
Each semiannual coupon is about EUR 30. The annual coupon is 6% of EUR 1,000, or EUR 60, and splitting it into two equal payments per year gives EUR 30 each.
- AEUR 30Correct
- BEUR 60
- CEUR 120
Explanation
Annual coupon = 6% x 1,000 = EUR 60. Paid semiannually, each payment is 60 / 2 = EUR 30. EUR 60 ignores the semiannual split; EUR 120 doubles instead of halving.
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