Kiss the Sky Enterprises has bonds on the market making annual payments, with 17 years to...
Kiss the Sky Enterprises has bonds on the market making annual payments, with 17 years to maturity, and selling for $840. At this price, the bonds yield 9.2 percent. What must the coupon rate be on the bonds?
Homework Answers
We have to calculate monthly payments or PMT which can be calculated using the Excel function PMT
=PMT(rate,nper,pv,fv)
where,
rate is ytm 9.2%
nper is 17 years
pv is current selling price of bond $840
fv is the face value of bond $1000
=PMT(9.2%,17,-840,1000)
=$73.03
$73.03 interest is on $1000, coupon rate will be
= Interest / face value of bond
= 7.303%
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