A bond that trades in the market at its face value is called a par bond. A par bond's coupon rate is the same as the market interest rate. As a par bond, the Alto Music Company Bond's coupon rate equals its yield rate.
Therefore, we must determine its periodic yield in order to calculate its semiannual coupon rate, which will be equal to that yield. Given the information, the effective annual yield is 0.086285. Consequently, we may write, Effective yearly rate equals the sum of the semi-annual rates. Or, 2 - 1 = 0.086285 (plus the semi-annual rate) 2 - 1
Rate on a semi-annual basis: 0.04224997. The bond has a $1,000 face value because face value x semi-annual coupon rate.
= $1,000 × 0.04224997=$42.2499 or, 42.25
The nominal value of a security is referred to as Face Value in the stock market. When referring to equities, the term "Face Value" is jargon for the stock's initial purchase price.
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