Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Introduction to Investments in Securities

Financial Accounting

7. Receivables and Investments

Introduction to Investments in Securities

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Multiple Choice

If a company issues a 4-year bond with a 6% annual coupon rate and makes coupon payments quarterly, what will be the amount of each coupon payment for a bond with a face value of $1,000?

$150

$60

$15

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Verified step by step guidance

Step 1: Understand the problem. The bond has a face value of $1,000, a 6% annual coupon rate, and coupon payments are made quarterly. The goal is to calculate the amount of each coupon payment.

Step 2: Determine the annual coupon payment using the formula: Annual Coupon Payment = Face Value × Annual Coupon Rate. In MathML:

Annual Coupon Payment = Face Value \times Annual Coupon Rate

Step 3: Since the bond pays coupons quarterly, divide the annual coupon payment by 4 to find the quarterly coupon payment. In MathML:

Quarterly Coupon Payment = \frac{Annual Coupon Payment}{4}

Step 4: Substitute the values into the formulas. Use the face value of $1,000 and the annual coupon rate of 6% (0.06 in decimal form) to calculate the annual coupon payment, then divide by 4 to find the quarterly payment.

Step 5: Verify the calculation by ensuring the quarterly coupon payment is consistent with the annual coupon rate and the bond's terms. This ensures the result aligns with the bond's structure and payment schedule.