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NISM Certifications · NISM-Series-VI: Depository Operations · Special Services - Debt Instruments and Government Securities

An investor holds 5,000 units of a 7% Government security of face value Rs 100 each, with coupons paid half-yearly. What coupon amount will be received on each coupon date, ignoring tax?

Each half-yearly coupon is Rs 17,500. The face value is Rs 5,00,000, the annual coupon at 7% is Rs 35,000, and it is divided by two for the half-yearly payment. Rs 35,000 would be the full year's coupon, not a single payment.

  1. ARs 17,500Correct
  2. BRs 35,000
  3. CRs 3,500
  4. DRs 7,000

Explanation

Total face value = 5,000 x 100 = Rs 5,00,000. Annual coupon = 7% x 5,00,000 = Rs 35,000. Coupon is paid half-yearly, so each payment = 35,000 / 2 = Rs 17,500. Rs 35,000 is the annual amount, which ignores the half-yearly frequency.

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