Series 7 Exam Question 281: Answer and Explanation

Question: 281

If an official statement has a dated date of May 1st, but the first coupon payment is set at December 1st, it means that the first payment is a

• A. long coupon
• B. mistake printed on the official statement
• C. short coupon
• D. normal payment for a seven-month bond

Correct Answer: A

Explanation:

A. You can assume that corporate and municipal bonds normally make interest payments semiannually (once every 6 months). However, because the first payment for this bond doesn't take place until 7 months after the dated date, the first payment is a long coupon. After the first payment, all additional coupon payments will be made every 6 months.