Question

A 5-year Circular File bond with a face value of $1,000 pays interest once a year of $50 and sells for $958.

a. What are its coupon rate and yield to maturity? (Do not round intermediate calculations. Enter the coupon rate as a whole percent and the yield to maturity as a percent rounded to 2 decimal places.)

b. If Circular wants to issue a new 5-year bond at face value, what coupon rate must the bond offer? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Answer 1

a. Coupon rate = 50 / 1000 = 5%

Yield to maturity = 6.00%

NPER	5
FV	1000
PMT	50.00
PV	958.00
Rate	6.00%	[Rate ( nper, pmt,-pv,fv)]

b. The coupon rate it must offer = 6.00%