Corporate Finance

Question

Question

Suppose a five-year, $1,000 bond with annual coupons has a price of $900.77 and a yield to maturity of 6.4%. What is the bond's coupon rate?

The bond's coupon rate is __% (Round to three decimal places.)

Answer 1

Answer #1

0.064(1000+900.77)/2=Annual coupon+(1000-900.77)/5

Annual coupon=[0.064(1000+900.77)/2]-(1000-900.77)/5

=$40.97864(Approx)

Hence bond's coupon rate=Annual coupon/Face value

=(40.97864/1000)

=4.098%(Approx).

answered by: dr.li

Answer 2

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