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

1 Answer
Jul 24, 2018

#$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#