Our first pricing example had annual coupon payments, but that is rarely the case. Nearly all corporate and government bonds pay coupons on a semiannual basis. Let’s look now at the Coca-Cola bond in Figure 6.4 and see how the semiannual feature affects the cash flow, the values that we use in the bond pricing equation, and thus the bond’s price.
Figure 6.4
Coca-Cola semiannual corporate bond.
Description
An illustration of a bond certificate for Coca-Cola. Text on the certificate reads as follows:
As of 1-Aug-2008
Coca-Cola Enterprises
Overview
Price (% of par): 128.63
Coupon rate: 8.50%
Maturity ...
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