A bond with $1,000 face value and twelve years to maturity is priced at $1,102.60 with...

Question

Question

Answer 1

Answer #1

Let coupon rate be r

1102.60=1000*r/5.33%*(1-1/(1+5.33%/2)^(2*12))+1000/(1+5.33%/2)^(2*12)

=>r=(1102.60-1000/(1+5.33%/2)^(2*12))/(1-1/(1+5.33%/2)^(2*12))*5.33%/1000

=>r=6.49835%

Answer 2

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