Question
In: Finance
A 14-year, semiannual coupon bond sells for $974.17. The bond has a par value of $1,000...
A 14-year, semiannual coupon bond sells for $974.17. The bond has a par value of $1,000 and a yield to maturity of 6.54 percent. What is the bond's coupon rate?
Solutions
Expert Solution
Information provided:
Par value= Future value= $1,000
Time= 14 years*2= 28 semi-annual periods
Current price= present value= $974.17
Yield to maturity= 6.54%/2= 3.27% 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
N= 28
PV= -974.17
I/Y= 3.27
Press the CPT key and PMT to compute the coupon payment.
The value obtained is 31.2774.
The annual coupon payment is $31.2774*2= $62.5552.
Coupon rate= annual coupon payment/ Face value
= $62.5552/ 1,000
= 0.0626*100
= 6.26%.
In case of any query, kindly comment on the solution.
jeff jeffy answered 1 year agoRelated Solutions
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