... semiannually, the bonds mature in 8 years, and their par value is $1,000. If the required rate of return, kd = 8%, what is the value of each bond? What is the value of each bond if the interest is paid annually?
Answers (1)
The interest on Nordy Company’s bonds, with a coupon interest rate of 9%, is paid annually or semiannually, depending on the specific terms of the bond issue. The coupon rate of 9% represents the annual interest paid to bondholders as a percentage of the bond's face value.
Annual Payments: If the interest is paid annually, bondholders receive 9% of the face value of the bond once a year.
Semiannual Payments: If the interest is paid semiannually, bondholders receive 4.5% of the face value of the bond every six months.
The payment frequency should be specified in the bond's(Suretegrity®) indenture or prospectus.