Question

Suppose a? five-year, $ 1 comma 000$1,000 bond with annual coupons has a price of $ 896.55$896.55 and a yield to maturity of 5.5 %5.5%. What is the? bond's coupon? rate? The? bond's coupon rate i?

Answer 1

Calculate coupon rate as follows Step 1: Calculate the coupon paye MS-Excel Formulas Financials ent as follows PMT aPMT( 5.5%,5-896.55, 1000) Function Arguments PMT Rate 5.5% 10.055 Nper 5 Pv -896.55 1896.55 Fv 1000 1000 Type numbe 30.77444768 Calculates the payment for a loan based on constant payments and a constant interest rate Type is a logical value: payment at the beginning of the period 1; payment at the end of the period 0 or omitted | Formula result 30.77444768 thi OK Cancel Therefore, the cou pon payment is $30.77 Step 2: Calculate the coupon rate as follows Coupon paym ent Coupon rate- Face value $30.77 $1,000 -0.03077 or 13.08%)