Question
A bond has a $12,000 face value, a 6-year maturity, and a 2.9% coupon. Find the total of the interest payments paid to the bondholder.
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Answer to a math question A bond has a $12,000 face value, a 6-year maturity, and a 2.9% coupon. Find the total of the interest payments paid to the bondholder.
Frederik
4.6101 Answers
To find the total interest payments paid to the bondholder, we first need to calculate the annual interest payment and then multiply it by the number of years the bond is held.
The annual interest payment for a bond is calculated as the face value of the bond multiplied by the coupon rate:
Annual interest payment = Face value Γ Coupon rate
Given:
Face value = $12,000
Coupon rate = 2.9% or 0.029
Annual interest payment = $12,000 Γ 0.029 = $348
Since the bond has a 6-year maturity, the total interest payments over the 6-year period would be:
Total interest payments = Annual interest payment Γ Number of years
Total interest payments = $348 Γ 6 = $2,088
So, the total interest payments paid to the bondholder over the 6-year period would be $2,088.
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