CFA Level I · CFA Level I Exam · Fixed-Income Instrument Features
A bond with a face value of 1,000 pays a coupon rate of 6% annually, with payments made semiannually. The coupon payment received by the investor each period is closest to:
Each semiannual coupon is about 30. The annual coupon is 6% of 1,000, which is 60, and it is split across two payments per year. Choosing 60 would ignore the semiannual frequency.
- A30Correct
- B60
- C120
Explanation
Annual coupon = 6% x 1,000 = 60. With semiannual payments, each coupon is 60 / 2 = 30. The value 60 ignores the payment frequency, and 120 doubles the annual amount.
Did you get it right without looking?
One question tells you little. A timed set on Fixed-Income Instrument Features shows your real accuracy, how long you take and where you lose marks.
More Fixed-Income Instrument Features questions
- A bond indenture includes a covenant that limits the issuer's ability to take on additional debt. This covenant is best described as:
- An investor holds a bond with a coupon rate of 5% that is currently trading at a market discount rate (yield) of 7% for similar-risk bonds. …
- 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 i…
- A bond issuer has the right to repurchase its bonds before maturity at a specified price. Relative to an otherwise identical option-free bon…
- A bond is issued with a coupon rate of 4% and the market required yield for similar bonds at issuance is 5%. The bond will most likely be is…
- A convertible bond has a market price of $1,150, a conversion ratio of 40 shares, and its shares trade at $25. The bond's straight value is …