A 23-year, semiannual coupon
bond sells for $981.73. The bond has a par value of $1,000 and a
yield to maturity of 6.81 percent. What is the bond's coupon
rate?
Homework Answers
price of coupon = Coupon payment per period * [1-(1+i)^-n]/i + par value/(1+i)^n
i = interest rate per period
n = number of periods
=>
981.73 = C/2 * [1-(1+0.0681/2)^-46]/(0.0681/2) + 1000/(1+0.0681/2)^46
=>
coupon payment = 66.52
hence
coupon rate = 66.52/1000 = 6.65%
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