Homework Answers
Given for Smith Company's bond
Face value = $1000
price = $985
YTM =7%
years to maturity = 8 years
Since bond is semi annual,
values on financial calculator are
FV = 1000
PV = -985
I/Y = 7/2 = 3.5
N = 8*2 = 16
compute for PMT, we get PMT = 33.76
So annual coupon = 2*33.76 = $67.52
So coupon rate = 67.52*100/1000 = 6.75%
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