Question

Suppose a​ five-year, $1,000 bond with annual coupons has a price of $904.07 and a yield to maturity of 5.8%. What is the​ bond's coupon​ rate?

Answer 1

Face/Par Value of bond = $1000

No of years to maturity(n) = 5 years

Yield to maturity(YTM) = 5.8%

Current market price = $904.07

Calculating the bond's coupon​ payment:-

904.07 = Coupon payment*4.2353817581 + 754.348

149.722= Coupon payment*4.2353817581

Coupon payment = $35.35

Annual Coupon rate = (Coupon payment/face Value)*100

Annual Coupon rate = ($35.35/$1000)*100

Annual Coupon rate = 3.535%