Smith Corp. bonds were issued 25 years ago. These bonds have a 15% required rate of...
Smith Corp. bonds were issued 25 years ago. These bonds have a 15% required rate of return, mature in 11 years, and have a current market value of $995.10. Find the coupon rate. Round intermediate steps and your final answer to four decimals. Enter your answer in decimal format (EX: .XXXX).
Homework Answers
Current Market Value of bonds is equal to the present value of all coupon payments and the principal amount
Let the coupon payment be x
995.10 = x*PVAF(15%, 11 years) + 1000*PVF(15%, 11 years)
995.10 = x*5.2337 +1,000*0.2149
x = 149.07235
Coupon Rate = 149.07235/1000 = 0.1491
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