Question

Suppose a bond with annual coupons has a price of $1,071.06, a face value of $1000 and a yield to maturity of 7%. This bond's coupon rate is closest to: PS. There is no missing data in this question. Select one: O a. 5.5% b. 7.5% C. 6.5% d. 6.0%

thank you

Answer 1

The correct answer is option b

Explanation:- The bond price is given as $ 1071.06 and the face value of the bond is $ 1000. From this we can imply that the bond is trading above par or at a premium. This is possible when the coupon rate is higher than the yield to maturity. Therefore the bonds coupon rate is 7.5%.