Question

What is the coupon rate for the bond? Assume semi-annual payments. Answer as a percent!

Bond	Coupon Rate	Yield	Price	t
Apple B	?	5.1%	1012.5	14

7.

A bond that yields 6% pays a coupon of $20 semi-annually. Which of the following is most likely the price of the bond?

		$990
		$1000
		$1050
		Not enough information to determine.

Answer 1

(6): Here yield = 5.1%. Thus the half yearly yield = 5.1%/2 = 2.55%

t = 14*2 = 28 and price = 1012.50. We know that price = present value of future cash flows.

Let the semi-annual coupon payments be x (in $). Thus 1012.5 = x/1.0255 + x/1.0255^2 + x/1.0255^3+.......x/1.0255^28 + 1000/1.0255^28

Solving the above equation we get x as $26.13. Thus annual coupon rate = 26.13/1000 * 100 *2

= 5.23% (2 decimal place)

(7): The answer will be "Not enough information to determine"

This is because in the question the YTM is not given and the period of the bond is also not given.

Excel table for the 6th question's solution:

Time (t)	Cash flow (CF)	1+r	PV
1	26.13	1.0255	25.48
2	26.13		24.85
3	26.13		24.23
4	26.13		23.63
5	26.13		23.04
6	26.13		22.47
7	26.13		21.91
8	26.13		21.36
9	26.13		20.83
10	26.13		20.31
11	26.13		19.81
12	26.13		19.32
13	26.13		18.84
14	26.13		18.37
15	26.13		17.91
16	26.13		17.47
17	26.13		17.03
18	26.13		16.61
19	26.13		16.19
20	26.13		15.79
21	26.13		15.40
22	26.13		15.02
23	26.13		14.64
24	26.13		14.28
25	26.13		13.92
26	26.13		13.58
27	26.13		13.24
28	26.13		12.91
28	1,000.00		494.08
		Total	1,012.50