Posted on: 15th Sep, 2007 10:13 pm
If 6.5% coupon paid semi-annually about bond. The next coupon payment is next month.
Why is the semi-annual coupon payment rate = 6.5% / 2 = 3.25% ?
My meaning is why need coupon payment rate to be divided 2 ?please tell me ,thanks advance.
Why is the semi-annual coupon payment rate = 6.5% / 2 = 3.25% ?
My meaning is why need coupon payment rate to be divided 2 ?please tell me ,thanks advance.
Hi Liaoyu,
Welcome to the forum.
If a bond is purchased semi-annually through coupon payment, it means that the interest payment is made twice each year. So the interest rate is divided by 2 because 2 is the number of periods used in calculating the coupon payment.
Welcome to the forum.
If a bond is purchased semi-annually through coupon payment, it means that the interest payment is made twice each year. So the interest rate is divided by 2 because 2 is the number of periods used in calculating the coupon payment.
thanks, larry. according to your help, and I have refered to some reference books. Now, I have understood.
you are welcome.