What is the coupon rate for a bond with 3 years until maturity, a price of $1,053.46, and a yield to maturity of 6%? Interest is paid annually.

Answers

Answer 1

Answer:

Coupon rate is 8%

Explanation:

We can ascertain the coupon rate by first of all determine the amount of coupon with pmt excel function below:

=pmt(rate,nper,-pv,fv)

rate is yield to maturity of 6%

nper is the number of coupons before maturity i.e 3 annual coupons in three years

pv is the current market price of $1,053.46

fv is the par value of $1,000

=pmt(6%,3,-1053.46,1000)=80

Coupon rate=pmt/face value=80/1000=8%


Related Questions

An investor buys a 10-year, 7% coupon bond for $1,050, holds it for 1 year, and then sells it for $1,040. What was the investor's rate of return?

Answers

Answer:

The answer is 5.71%

Explanation:

Solution

Given that

Coupon rate = 7%

Bond = $1050

Sale of the bond = $1040

n = 10 years, n = 1 year

Now we find the investor's rate of return

Thus

Coupon payment = 7%* 1000

=70

1050 = 70/(1+r) + $1,040/(1+r)

r= 5.71%

Therefore the rate of return of the investor is 5.71%

or

Rate of return = (P1-P0+ Interest ) /P0

= (1040 -1050 + 70 )/1050

= .0571 or 5.71%

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