Suppose a -year, bond with annual coupons has a price of and a yield to maturity of . What is the bond's coupon rate? The coupon rate is nothing%. (Round to two decimal places.)

Complete Question:

Suppose a five-year, $1000 bond with annual coupons has a price of $903.35 and a yield to maturity of 5.6%. What is the bond's coupon rate?

3.396% Approximately

Explanation:

We can calculate the coupon interest by using the formula given in the attachment.

Now, here we have:

F is the Face value which is $1000

P is the price of the bond which in this case is $903.35

C is the Coupon interest

n are the number of years which is 5 years in this case

Yield to Maturity is 5.6%

By putting the values in the given equation we have:

5.6% = [C        +    ($1000 - $903.35)/5 years]  /  [($1000 + $903.35)/2]

5.6% =   [C        +    19.33]  /  [951.675]

0.056 * 951.675 = C        +    19.33

53.2938 = C + 19.33

C = 53.2938 - 19.33

C = $33.96 approximate estimate.

Now we will find the coupon rate by using the following formula:

Coupon Rate = Coupon Interest / Face Value

By putting values, we have:

Coupon Rate = $33.96 / $1000 = 3.396% Approximately.

Accurate Coupon interest can be calculated using excel. The above answer gives minor difference in decimal points.

lbc corporation makes and sells a product called product wz. each unit of product wz requires 4.1 hours of direct labor at the rate of $20.00 per direct labor-hour. management would like you to prepare a direct labor budget for june. the company plans to sell 28,000 units of product wz in june. the finished goods inventories o

disadvantages of leasing a vehicle: no vehicle equity and mileage limitations

disadvantages of purchasing a vehicle: large down payment and vehicle depreciation

#plato4lyfe