The annual coupon payment of a bond with a 7% coupon rate and a par value of $1,000 is:

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Multiple Choice

The annual coupon payment of a bond with a 7% coupon rate and a par value of $1,000 is:

A bond’s annual coupon payment equals the coupon rate applied to its par value. Here, with a 7% coupon rate and a par value of 1,000, the payment is 0.07 × 1,000 = 70 dollars. So the annual coupon is $70. The other amounts would require different coupon rates (for example, $7 would be 0.7% of par, and $700 would imply a 70% coupon rate) or describe a zero-coupon bond with no periodic coupon.

A bond’s annual coupon payment equals the coupon rate applied to its par value. Here, with a 7% coupon rate and a par value of 1,000, the payment is 0.07 × 1,000 = 70 dollars. So the annual coupon is $70. The other amounts would require different coupon rates (for example, $7 would be 0.7% of par, and $700 would imply a 70% coupon rate) or describe a zero-coupon bond with no periodic coupon.

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