Question

A bond has a par value of $1,000, a current yield of 7.125 percent, annual interest payments, and 5 years to maturity. The bond quote is 101.584. What is the amount of each coupon payment?

Answer 1

Current yield = 7.125%

Price of bond = bond quote / 100 * par value = 101.584 / 100 * 1000 = 1015.84

The formula for current yield is: Current yield = annual coupon payment / bond price

Or 7.125% = annual coupon payment / 1015.84

Which means annual coupon payment = 7.125% * 1015.84 = 72.38

Answer: Annual coupon payment = $ 72.38

Hope this helped ! Let me know in case of any queries.

Answer 2

Current price of the bond = $1015.84

Face value of Bond = $1000

Years to maturity (n) = 5 years

Current yield (r ) = 7.125%

..

Let coupon amount be

Answer 3

price = couponpayment * PVIFA(r%,n) + parvalue * PVIF(r%,n)

1015.84 = coupon payment * [1-(1+0.07125)^-5]/0.07125 + 1000/(1+0.07125)^5

coupon payment = 75.13..........ans