If a bond has a face value of $1,000 and the bondholder receives coupon payments of $27.50 semi-annually, the bond's coupon rate is:
A)2.75%
B)5.50%
C)27.5%
D)A value that cannot be determined from the information provided

Question

Quizplus · Accepted Answer

The coupon rate is the annual interest payment divided by the face value of the bond. Since the bondholder receives semi-annual payments of $27.50, the annual coupon payment is $55. Dividing this by the face value of $1,000 gives a coupon rate of 5.50%. Therefore, the correct answer is B.

If a Bond Has a Face Value of $1,000 and the Bondholder