XYZ Corp has bonds on the market with 7.5 years to maturity, a YTM of 6...

Question

Question

XYZ Corp has bonds on the market with 7.5 years to maturity, a YTM of 6...

XYZ Corp has bonds on the market with 7.5 years to maturity, a YTM of 6 percent, and a current price of $980. The face value is $1,000. The bonds make semiannual payments. What must be the dollar coupons (dollar amount, not percentage) paid every six-months on XYZ’s bonds?

Hint: A YTM of 6% for a semiannual bond is a reporting convenience. It implies the actual 6 month return is 3%.

You need to use the annuity formula to solve this one.

business finance

Add a comment Improve this question Transcribed image text

Answer 1

Answer #1

Price of bond = Present value of bond (PV) = - $980

Face value of bond = Future value of bond (FV) = $1000

No of semi-annual coupons = 15 half-years

Yield to maturity (Y) = 6% p.a. = 3% per half-year

Coupon payment (PMT) = ??

Therefore by using financial calculator or PMT function in excel,

Semi-annual Coupon payment (PMT) = $28.32

Alternative solution:

PV of bond = PV of coupon payments + PV of face value

980 = PV of coupon payments + 1000 / 1.03¹⁵

PV of coupon payments = $338.14

Therefore using annuity function,

Semi-annual Coupon payment (A) = i x PV / [1-(1+i)^-n]

Semi-annual Coupon payment (A) = 0.03 x 338.14 / [1-(1+0.03)^-15] = $28.32

Thumbs up please if satisfied. Thanks :)

Add a comment

Answer 2

Similar Homework Help Questions

XYZ Corp has bonds on the market with 7.5 years to maturity, a YTM of 6...

XYZ Corp has bonds on the market with 7.5 years to maturity, a YTM of 6 percent, and a current price of $1,000. The face value is $1,000. The bonds make semiannual payments. What must be the dollar coupons (dollar amount, not percentage) paid every six-months on XYZ’s bonds? Hint: A YTM of 6% for a semiannual bond is a reporting convenience. It implies the actual 6 month return is 3%. You need to use the annuity formula to solve...
Lumberton Corp. has bonds on the market with 14.5 years to maturity, a YTM of 8.97%,...

Lumberton Corp. has bonds on the market with 14.5 years to maturity, a YTM of 8.97%, a par value of $1,000 and a current price $1,058.56. The bonds make semiannual payments. What must the coupon rate be on the bonds ?
Henley Corporation has bonds on the market with 10.5 years to maturity, a YTM of 5.7...

Henley Corporation has bonds on the market with 10.5 years to maturity, a YTM of 5.7 percent, a par value of $1,000, and a current price of $945. The bonds make semiannual payments. What must the coupon rate be on the bonds? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Coupon rate % You purchase a bond with an invoice price of $1,043. The bond has a coupon rate...

McConnell Corporation has bonds on the market with 20 years to maturity, a YTM of 6.8...

McConnell Corporation has bonds on the market with 20 years to maturity, a YTM of 6.8 percent, a par value of $1,000, and a current price of $1,326.50. The bonds make semiannual payments. What must the coupon rate be on these bonds?
Coupon Rates [LO2] McConnell Corporation has bonds on the market with 14.5 years to maturity, a YTM of 5.3 percent, a par value of $1,000, and a current price of $1,045

8. Coupon Rates [LO2] McConnell Corporation has bonds on the market with 14.5 years to maturity, a YTM of 5.3 percent, a par value of $1,000, and a current price of $1,045. The bonds make semiannual payments. What must the coupon rate be on these bonds?10. Valuing Bonds [LO2] Yan Yan Corp. has a $2,000 par value bond outstanding with a coupon rate of 4.4 percent paid semiannually and 13 years to maturity. The yield to maturity of the bond...
McConnell Corporation has bonds on the market with 11 years to maturity, a YTM of 11.0...

McConnell Corporation has bonds on the market with 11 years to maturity, a YTM of 11.0 percent, a par value of $1,000, and a current price of $1,236.50. The bonds make semiannual payments. What must the coupon rate be on these bonds? Multiple Choice 29.62% 23.96% 14.86% 14.76% 11.94%

McConnell Corporation has bonds on the market with 18 years to maturity, a YTM of 11.0...

McConnell Corporation has bonds on the market with 18 years to maturity, a YTM of 11.0 percent, a par value of $1,000, and a current price of $1,176.50. The bonds make semiannual payments. What must the coupon rate be on these bonds? Multiple Choice Ο 22.60% Ο 13.37% Ο 13.27% Ο 26.58% Ο 11.28%
Rhiannon Corporation has bonds on the market with 16.5 years to maturity, a YTM of 7.7...

Rhiannon Corporation has bonds on the market with 16.5 years to maturity, a YTM of 7.7 percent, a par value of $1,000, and a current price of $1,065. The bonds make semiannual payments. What must the coupon rate be on these bonds? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Henley Corporation has bonds on the market with 14.5 years to maturity, a YTM of 10.2...

Henley Corporation has bonds on the market with 14.5 years to maturity, a YTM of 10.2 percent, a par value of $1,000, and a current price of $953. The bonds make semiannual payments What must the coupon rate be on the bonds? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Coupon rate

Rhiannon Corporation has bonds on the market with 16.5 years to maturity, a YTM of 6.3...

Rhiannon Corporation has bonds on the market with 16.5 years to maturity, a YTM of 6.3 percent, a par value of $1,000, and a current price of $1,036. The bonds make semiannual payments. What must the coupon rate be on these bonds? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g. 32.16.) Coupon rate

XYZ Corp has bonds on the market with 7.5 years to maturity, a YTM of 6...

Homework Answers

Add Answer to:
XYZ Corp has bonds on the market with 7.5 years to maturity, a YTM of 6...

Post as a guest

Earn Coins