About coupon payment in accrued interest ?

liaoyu03 · Joined: 09 Sep 2007 Posts: 198 7.29 Dollars($)

If 6.5% coupon paid semi-annually about bond. The next coupon payment is next month.
Why is the semi-annual coupon payment rate = 6.5% / 2 = 3.25% ?
My meaning is why need coupon payment rate to be divided 2 ?please tell me ,thanks advance.

larry · Joined: 27 Jun 2007 Posts: 3328 473.40 Dollars($)

Hi Liaoyu,

Welcome to the forum.

If a bond is purchased semi-annually through coupon payment, it means that the interest payment is made twice each year. So the interest rate is divided by 2 because 2 is the number of periods used in calculating the coupon payment.

liaoyu03 · Joined: 09 Sep 2007 Posts: 198 7.29 Dollars($)

thanks, larry. according to your help, and I have refered to some reference books. Now, I have understood.

larry · Joined: 27 Jun 2007 Posts: 3328 473.40 Dollars($)

you are welcome.

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