A Corporation Issues a Bond with a Face Value of $10,000

question 4

Multiple Choice

A corporation issues a bond with a face value of $10,000 and a coupon rate of 5.65% that matures on 15/07/2015. The holder of such a bond receives coupon payments of $282.50. How frequently are coupon payments made in this case?

• A) quarterly
• B) semiannually
• C) annually
• D) monthly

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Definitions:

Dividend Growth Model

A valuation method that estimates the price of a company's stock based on the future dividends it is expected to pay, which are assumed to grow at a constant rate.

Current Stock Price

The price at which a stock is currently trading on the stock market.

Discount Rate

It refers to the rate used in discounted cash flow analysis for the purpose of calculating the present value of future expected cash flows.

Preferred Stock

A type of stock that provides a fixed dividend before any dividends are paid to common stockholders and usually has no voting rights.