Volbeat Corporation has bonds on the market with 19.5 years to maturity, a YTM of 11.2...

Volbeat Corporation has bonds on the market with 19.5 years to maturity, a YTM of 11.2 percent, and a current price of $936. The bonds make semiannual payments. Required: What must the coupon rate be on the bonds? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Coupon rate % =

Expert Solution

Price of bond = coupon * PVIFA (n,i)+ face value * PVIF (n,i)

936 = Coupon * PVIFA ( 39 , 5.6) + 1000 * PVIF (39 ,5.6%)

936 = Coupon *15.72449493800740 + 1000 * 0.1194282834715880

Semi Annual Coupon = (936-119.4282834715880 ) / 15.72449493800740

= $ 51.9299169701593

Semi Annual Coupon Rate = Coupon Amount / Face Value * 100

= $ 51.9299169701593 / 1,000 * 100

=5.19299169701593 %

Annual Coupon Rate = 5.19299169701593 % *2

= 10.39%

Hence the correct answer is 10.39%

jeff jeffy answered 2 years ago

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