Question

If the price of a 5 year bond is $950, the face value of the bond is $1,000, and the yield to maturity is 10.33%, what is the coupon rate?

A. 9%

B. 5%

C. 10%

D. Cannot be determined

Answer 1

price of the bond=(1000*coupon rate)*((1-(1+10.33%)^(-5))/10.33%)+1000/(1+10.33%)^5

950=(1000*coupon rate)*((1-(1+10.33%)^(-5))/10.33%)+1000/(1+10.33%)^5

coupon rate is=((950-1000/(1+10.33%)^5)/((1-(1+10.33%)^(-5))/10.33%))/1000

=9% (answer)

the above is answer..