Question

In: Finance

A 5-year $1,000 facevalue coupon bond is currently sold at $109. Assume the yield to...

A 5-year $1,000 face value coupon bond is currently sold at $109. Assume the yield to maturity of this coupon bond is 12.37% and the coupon bond pays the interest payment annually.

What is the annual coupon rate of the bond?


Solutions

Expert Solution

Bond cant be selling at 109. This is an error. The value is taken 1009

Value of Bond =

Where r is the discounting rate of a compounding period i.e. 12.37%

And n is the no of Compounding periods 5 years

Coupon ?

1009 =

1009 = Coupon * 3.57197769975 + 558.14635854

Coupon = 1009 - 558.14635854 / 3.57197769975

Coupon = 126.2196

Coupon % = 126.2196 / 1000 = 12.62%


Related Solutions

A. A 10-year $1,000 face value coupon bond is currently sold at $1,033. Assume the yield...
A. A 10-year $1,000 face value coupon bond is currently sold at $1,033. Assume the yield to maturity of this coupon bond is 7.26% and the coupon bond pays the interest payment annually. What is the annual coupon rate of the bond? Please round your answer to the fourth decimal. (e.g. 0.1234) B. A $10,000 face value discount bond maturing in one year is currently selling for $9,094.41. What is the yield to maturity to this discount bond? Please round...
A 5-year, $1,000 face bond with a 3% coupon is currently selling with a 4% YTM...
A 5-year, $1,000 face bond with a 3% coupon is currently selling with a 4% YTM (yield to maturity). Calculate the duration of the bond and how long should you hold the bond if you want to earn the 4% YTM that you thought you would get when you bought the bond? Assume that market yields rise by 40 basis points. What do you expect to happen to the bond’s price, using modified duration?
A 14-year, 8% coupon, paid semiannually, option-free bond is currently traded at 109. If an investor...
A 14-year, 8% coupon, paid semiannually, option-free bond is currently traded at 109. If an investor reinvests coupon income at 6%, what is the total return of the investment? Keep four decimals, e.g., 10.1234%.
A bond has a face value of $1,000, an annual coupon rate of 5 percent, yield...
A bond has a face value of $1,000, an annual coupon rate of 5 percent, yield to maturity of 10 percent, and 10 years to maturity Calculate the bond's duration.
A 7% coupon bond has a par value of $1,000 and a yield-to-maturity of 5%. You...
A 7% coupon bond has a par value of $1,000 and a yield-to-maturity of 5%. You purchase the bond when it has exactly 7 years remaining until maturity. You hold the bond for 6 months, collect the coupon payment, and then sell the bond immediately. If the bond's yield-to-maturity is 9% when you sell it, what is your percentage return over this 6-month holding period? Enter your answer as a decimal and show 4 decimal places. For example, if your...
Current yield and yield to maturity An annual coupon bond has a $1,000 face value, coupon...
Current yield and yield to maturity An annual coupon bond has a $1,000 face value, coupon rate of 5%, will mature in 10 years, and currently sells for $810.34. a. What is the yield to maturity of the bond? b. What is the current yield of the bond? c. Why does the current yield differ from the yield to maturity? d. One year later, the market rates have increased to 8%. Assume that you have just received a coupon payment...
Assume you own a bond with a 5% coupon, a 6% yield-to-maturity, 5 years to maturity,...
Assume you own a bond with a 5% coupon, a 6% yield-to-maturity, 5 years to maturity, and a $1,000 par value. It is currently priced at $957.35. If the yield-to-maturity increases to 8.0%, what is the price of the bond? Select one: a. $1,043.76 b. $878.33 c. $1,000 d. $1,087.52
1. What is the yield to maturity for a $1,000 par, 10 year, 8% coupon bond...
1. What is the yield to maturity for a $1,000 par, 10 year, 8% coupon bond with semiannual payments, callable in 3 years for $1,050 that sells for $1,071.06? A. 13.2% B. 5.4% C. 7.0% D. 9.0% 2. What is the yield to call for a $1,000 par, 10 year, 8% coupon bond with semiannual payments, callable in 3 years for $1,050 that sells for $1,071.06? A. 14.2% B. 6.9% C. 9.0% D. 5.4% 3. What is the yield to...
1. What is the yield to maturity for a $1,000 par, 25 year, 9% coupon bond...
1. What is the yield to maturity for a $1,000 par, 25 year, 9% coupon bond with annual payments, callable in 2 years for $1,100 that sells for $900? A. 20.1% B. 8.6% C. 18.6% D. 10.1% 2. What is the yield to call for a $1,000 par, 25 year, 9% coupon bond with annual payments, callable in 2 years for $1,100 that sells for $900? A. 8.6% B. 20.1% C. 18.6% D. 10.1%
You bought a 10-year zero-coupon bond with a face value of $1,000 and a yield to...
You bought a 10-year zero-coupon bond with a face value of $1,000 and a yield to maturity of 2.7% (EAR). You keep the bond for 5 years before selling it. a:What was the price of the bond when you bought it? b:What is your personal 5-year rate of return if the yield to maturity is still 2.7% when you sell the bond? (i.e. what is your rate of return given what you sold it for at the end of year...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT