- A bond’s coupon is the dollar value of the periodic interest payment promised to bondholders; this equals the coupon rate times the face value of the bond. For example, since the bond issuer promises to pay an annual coupon rate of 11% to bond holders and the face value of the bond is K100, the bond holders are being promised a coupon payment of (0.11)(K100) = K11 per year.
While the yield rate of the bond will be obtained as,
2. The present value of the investment
3. The yield to maturity of the bond
Where C-Coupon Payment
t- time for security to mature
Since the present value of the investment is a positive, then i could advise the client to invest K50,000.