A bond has a par value of $1,000, a current yield of 6.87 percent, and semiannual coupon payments. The bond is quoted at 100.78. What is the amount of each coupon payment? Multiple Choice $34.35 $68.70 $34.62 $69.24

Bond’s current yield = annual coupon payment / market price of bond

Where,

Bond’s current yield = 6.87%

Annual coupon payment =?

Market price or Quoted price of the bond = 100.78% of face value = 100.78% * $1000 = $1007.80

Therefore,

6.87% = annual coupon payment / $1007.80

Or annual coupon payment = 6.87% *$1007.80 = $69.24

But the bond pay semiannual coupon, therefore amount of each coupon payment = $69.24/2 = $34.62

Therefore, correct answer is option: $34.62