Products & Their RisksQuestion 14 of 398
A corporate bond has a 5% coupon and a $1,000 par value. How much annual interest does the bondholder receive?
a.$50
b.$5
c.$500
d.It depends on the current market price
Explanation
The coupon is a fixed percentage of par, so 5% of $1,000 equals $50 per year, regardless of the bond's current market price. The interest amount does not change with market price; only yield does.
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