Answer to Question #50096 in Finance for abdulla sabit

Question

Describe how the annual bond valuation formula is changed to evaluate semi-annual coupon bonds.Then write out the revised formula.

Answer 1

Most bonds pay interest semi-annually, which means you receive two payments each year. So with a $1,000 bond that has a 10% semi-annual coupon, you would receive $50 (5%*$1,000) twice a year for the next 10 years.