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Toreal Metals, Inc. has a bond outstanding that has a $1,000 par value and a market price of $1,000. The bond has 10 years remaining to maturity. Assuming an annual market interest rate of 12% and that the bond pays interest semiannually, what is the ANNUAL coupon rate on the bond?

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Answer #1

Since par value and bond price are equal, bond yield to maturity will equal to the coupon rate. If the par value and price are different yield to maturity will be different from coupon rate.

Hence, Coupon rate is 12%

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