A $8,634 par-value bond is purchased at a coupon rate of 4.6%. If interest payments are to be made semiannually (every six months), how much will each interest payment be?
To calculate the amount of each interest payment, we need to find the semi-annual coupon payment.
First, divide the annual coupon rate by 2 to get the semi-annual coupon rate:
Semi-annual coupon rate = Annual coupon rate / 2 = 4.6% / 2 = 0.046 / 2 = 0.023
Next, multiply the semi-annual coupon rate by the par value of the bond to find the semi-annual coupon payment:
Semi-annual coupon payment = Semi-annual coupon rate * Par value
Semi-annual coupon payment = 0.023 * $8,634 = $198.582
Therefore, each interest payment will be approximately $198.582.