What is the coupon payment of the bonds issued by the firm in the example?

The coupon payment of a bond represents the annual interest payment that the bondholder receives from the bond issuer. This payment is typically calculated as a percentage of the bond's face or par value, known as the coupon rate.

In this case, if the answer is $40, it indicates that the coupon payment, which may be calculated based on the bond's face value and the interest rate stipulated in the bond agreement, amounts to $40 per year. This amount is consistent with a scenario where the face value of the bond might be $1,000 and the coupon rate is 4%. The calculation would be:

Coupon Payment = Face Value × Coupon Rate

For example, using the mentioned values, if the face value is $1,000 and the coupon rate is 4%, the coupon payment is:

$1,000 × 0.04 = $40

Therefore, a coupon payment of $40 reflects a common structure for bond payments, making it the correct answer in the context of the example provided. Understanding the coupon payment helps bond investors gauge their expected income from the bonds they hold.