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The bonds of Microhard, Inc. carry a 10% annual coupon, have a $1,000 face value, and...

The bonds of Microhard, Inc. carry a 10% annual coupon, have a $1,000 face value, and mature in 4 years. They are selling for $1,102. What is the market rate of interest on comparable bonds?

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Homework Answers

Answer #1

You can solve this question using a Financial Calculator

Market interest rate mean I/Y on the Financial Calculator

First Step is to Clear your TVM Functions

Press 2nd FV

Second step is to find the Market interest rate

PV = - 1102 Enter ( the current selling price of the bond )

FV = 1000 ( face value of the bond ) Enter

N = 4 ( No. of years to Maturity ) Enter

PMT = 100 ( 10% Coupon Rate of 1000) Enter

CPT I/Y = 6.99 ( CPT stands for Compute)

Therefore your Answer the Market interest rate is 6.99%

Approximately 7%

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