Face value (principal) £1,000,000 Time to maturity 5 years Stated interest rate 5% Market rate at issuance 6% Frequency of interest payments 1 per year Interest payment £50,000 Each annual interest payment is the face value times the stated interest rate. Here, £1 million 5%. If interest is paid other than annually, adjust the interest rate to match the interest payment period (e.g., divide the annual stated rate by two for semiannual interest payments).
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