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In practice, bonds issued in the US usually make coupon payments twice a year. So, if an ordinary bond has a coupon rate of 14%,
In practice, bonds issued in the US usually make coupon payments twice a year. So, if an ordinary bond has a coupon rate of 14%, then the owner will get a total of $140 per year, but it will come in two payments of $70 each. Suppose we are examining such a bond. The yield to maturity is quoted at 16%. The bond matures in seven years. What is the bonds price? What is the effective annual yield on this bond?
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