Determine the interest payment for the following three bonds: 4 percent coupon corporate bond (paid semiannually), 4.75 percent coupon Treasury note, and a corporate zero-coupon bond maturing in 15 years. (Assume a $1,000 par value.)
A)$4.00, $4.75, $0, respectively
B)$20.00, $23.75, $0, respectively
C)$20.00, $23.75, $150, respectively
D)$40.00, $47.50, $0, respectively

Question

Quizplus · Accepted Answer

For the 4 percent coupon corporate bond, the semiannual interest payment is:
(0.04/2) x $1,000 = $20.00

For the 4.75 percent coupon Treasury note, the semiannual interest payment is:
(0.0475/2) x $1,000 = $23.75

For the corporate zero-coupon bond maturing in 15 years, since it is a zero-coupon bond, there is no periodic interest payment. Therefore, the interest payment is $0.

Thus, the best choice is B, as it correctly identifies the interest payments for all three bonds.

Determine the Interest Payment for the Following Three Bonds: 4