Question

In: Finance

Ashes Divide Corporation has bonds on the market with 15 years to maturity, a YTM of...

Ashes Divide Corporation has bonds on the market with 15 years to maturity, a YTM of 12.0 percent, and a current price of $1,176.50. The bonds make semiannual payments. What must the coupon rate be on these bonds? (Do not round your intermediate calculations.)

Solutions

Expert Solution

Information provided:

Par value= future value= $1,000

Current price= present value= $1,176.50

Time= 15 years*2= 30 semi-annual periods

Yield to maturity= 12%/2= 6% per semi-annual period

The coupon rate is computed by first calculating the coupon payment.

Enter the below in a financial calculator to compute the coupon payment:

FV= 1,000

PV= -1,176.50

N= 30

I/Y= 6

The value obtained is 72.82.

Therefore, the amount of coupon payment= 72.82*2= $145.64.

Coupon rate= Coupon payment/ Par value

                        = $145.64/ $1,000

                        = 0.1456*100

                        = 14.56%.

In case of any query, kindly comment on the solution.


Related Solutions

Ashes Divide Corporation has bonds on the market with 13 years to maturity, a YTM of...
Ashes Divide Corporation has bonds on the market with 13 years to maturity, a YTM of 7.4 percent, and a current price of $1,186.50. The bonds make semiannual payments. What must the coupon rate be on these bonds? (Do not round your intermediate calculations.) rev: 09_18_2012 Multiple Choice 9.66% 19.36% 9.76% 16.32% 8.14% Grohl Co. issued 17-year bonds a year ago at a coupon rate of 12 percent. The bonds make semiannual payments. If the YTM on these bonds is...
2. Ashes Divide Corporation has bonds on the market with 14.5 years to maturity, a YTM...
2. Ashes Divide Corporation has bonds on the market with 14.5 years to maturity, a YTM of 6.8 percent, and a current price of $924. The bonds make semiannual payments. What must the coupon rate be on these bonds? * a. 5.45% b. 2.72% c. 5.96% d. 2.98% e. None of the above 3. A bond has a quoted price of $1,080.42. It has a face value of $1,000, a semiannual coupon of $30, and a maturity of five years....
McConnell Corporation has bonds on the market with 15 years to maturity, a YTM of 7.8...
McConnell Corporation has bonds on the market with 15 years to maturity, a YTM of 7.8 percent, a par value of $1,000, and a current price of $1,276.50. The bonds make semiannual payments. What must the coupon rate be on these bonds? Multiple Choice 11.06% 21.98% 10.96% 17.22% 8.59%
ABC Inc. has bonds on the market with 15 years to maturity, a YTM of 7%...
ABC Inc. has bonds on the market with 15 years to maturity, a YTM of 7% and a current price of $950.  The bond makes semiannual payments.  What must the coupon rate be on these bonds?
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 % =
McConnell Corporation has bonds on the market with 19 years to maturity, a YTM of 11.0...
McConnell Corporation has bonds on the market with 19 years to maturity, a YTM of 11.0 percent, a par value of $1,000, and a current price of $1,156.50. The bonds make semiannual payments. What must the coupon rate be on these bonds? Multiple Choice 13.08% 25.99% 12.98% 22.48% 11.22%
McConnell Corporation has bonds on the market with 14 years to maturity, a YTM of 6.8...
McConnell Corporation has bonds on the market with 14 years to maturity, a YTM of 6.8 percent, a par value of $1,000, and a current price of $1,156.50. The bonds make semiannual payments. What must the coupon rate be on these bonds?
McConnell Corporation has bonds on the market with 23.5 years to maturity, a YTM of 7...
McConnell Corporation has bonds on the market with 23.5 years to maturity, a YTM of 7 percent, a par value of $1,000, and a current price of $1,051. The bonds make semiannual payments. What must the coupon rate be on these bonds?
Ponzi Corporation has bonds on the market with 14.5 years to maturity, a YTM of 5.49...
Ponzi Corporation has bonds on the market with 14.5 years to maturity, a YTM of 5.49 percent, and a current price of $894.44. The bonds make semiannual payments. What must the coupon rate be on these bonds?
McConnell Corporation has bonds on the market with 17 years to maturity, a YTM of 10.0...
McConnell Corporation has bonds on the market with 17 years to maturity, a YTM of 10.0 percent, a par value of $1,000, and a current price of $1,196.50. The bonds make semiannual payments. What must the coupon rate be on these bonds? Multiple Choice 20.81% 10.39% 24.90% 12.53% 12.43%
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT