Question

Suppose you purchase a $500 bond with a 6.5% coupon. What is the periodic interest rate of this bond?

Answer 1

`$16.25`

Explanation:

In a US bond, typically these interest payments are semiannual, meaning the investor will receive interest twice a year.

Hence, on a `$500` bond with a `6.5%` coupon

periodic interest paid is `$(500xx6.5xx1)/(2xx100)=$16.25`