Rhiannon Corporation has bonds on the market with 20.5 years tomaturity, a YTM of 6.7...

Rhiannon Corporation has bonds on the market with 20.5 years to maturity, a YTM of 6.7 percent, and a current price of $1,044. The bonds make semiannual payments.

What must be the coupon rate on these bonds? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Coupon rate %

Solutions

Expert Solution

Value of Bond =

Where r is the discounting rate of a compounding period i.e. 6.7% / 2 = 0.0335

And n is the no of Compounding periods 20.5 years * 2 = 41

Coupon ?%

1044 =

1044 = Coupon * 22.1199278397 + 258.98241737

Coupon = 1044 - 258.98241737 / 22.1199278397

Coupon = 35.4891565794

Coupon Rate = 35.4891565794 * 2 / 1000 = 7.10%

jeff jeffy answered 2 years ago

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