Consider a straight-coupon bond (or bank loan)

with semiannual interest payments at an 8 percent annualized rate. Per $100 of face value, what is the semiannual interest payment if the day count is based on the following methods?

a. Actual/actual

b. 30/360

c. Actual/365 if the coupon payment date is August 15, 1998 Success and failure Corporate bonds Cumulative default rates, 1970-94

% of issuers defaulting 40 30 20 10 0

1 5 10 15 20 Years B

Ba Baa A

Aa Aaa

d. Actual/360 if the coupon payment date is August 15, 1998.

AppendixLO1