the bonds issued by db bear a semi annual coupon. bond matures in 8 years and has a $1000 face value. currently bond sells for $986 and have a yield to maturity of 4.44% What is the coupon rate of these bonds ?
enter inputs according to fiancial calculator
Let,
Semi Annual Interest Rate = i/2
YTM = 4.44% / 2 = 2.22%
Years = 8 * 2 = 16 years
Bond Price = Interest * PVIFA(YTM, Years) + Par Value * PVIF(YTM, Years)
986 = [(1000*i) / (2*100) * 13.3440] + [1000 * 0.7038]
986 = (66.72*i) + 703.8
(66.72*i) = 986 - 703.80
i = 4.23%
Therefore,
Coupon rate of Bond = 4.23%
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