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CSEET · Economic and Business Environment · Indian Financial Markets

A company issues a debenture of face value Rs 1,000 carrying a coupon rate of 9% per annum. What is the annual interest payable per debenture, and on what amount is it computed?

The annual interest is Rs 90 per debenture, calculated on face value. The coupon rate applies to the face value of Rs 1,000, so 9% gives Rs 90 each year regardless of the debenture's current market price.

  1. ARs 90, computed on the face valueCorrect
  2. BRs 90, computed on the market price
  3. CRs 9, computed on the face value
  4. DRs 900, computed on the face value

Explanation

Coupon interest is always calculated on the face value of the debenture, not on the market price. 9% of Rs 1,000 equals Rs 90 per year. Rs 9 results from dividing by 100 twice, and Rs 900 results from misplacing the percentage.

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