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).