If BRC Inc. issued a bond that is currently selling for $950 has 7 years left...
If BRC Inc. issued a bond that is currently selling for $950 has 7 years left until maturity and currently as a 10.4% yield to maturity. What must the bond s coupon payment be?
Homework Answers
| Par value | 1000 | |||
| Issue price | 950 | |||
| Maturity period | 7 | |||
| Market rate | 10.40% | |||
| Coupon Interest be x | ||||
| Annuity PVF at 10.40% for 7yrs | 4.80496 | |||
| PVF at 10.40% for 7th year | 0.500284 | |||
| Present value of interest | 4.80496x | |||
| Present value of Principal | 500.284 | |||
| Price of bonds | 500.28+4.80496x | |||
| As per question, equation is | ||||
| 950 = 500.28 + 4.80496x | ||||
| X = 93.6 | ||||
| Annual Coupon rate = 9.36% | ||||
| Answer is 9.36% | ||||
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