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NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Investing in Fixed Income Securities (NISM XXI-A)

A bond with a face value of Rs 1,000 pays an annual coupon of Rs 80. What is its coupon rate?

The coupon rate is 8%. It is calculated by dividing the annual coupon of Rs 80 by the face value of Rs 1,000, because coupon rate is always expressed on face value and not on the market price of the bond.

  1. A6%
  2. B8%Correct
  3. C10%
  4. D12.5%

Explanation

Coupon rate = annual coupon / face value = 80/1,000 = 8%. The 12.5% option wrongly divides face value by coupon, and the others are not derived from the data.

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