Question

Beam Inc. bonds are trading today for a price of $1,185.41. The bond currently has 13 years until maturity and has a yield to maturity of 7.25%.

The bond pays annual coupons and the next coupon is due in one year. What is the coupon rate of the bond? (round to one decimal place.)

Answer #2

Solution

Current price of bond=Present value of coupon payments+Present value of face value

Current price of bond=Coupon payment*((1-(1/(1+r)^n))/r)+Face value/(1+r)^n

where

Current price of bond=1185.41

n=number of periods=13

r-discount rate per period=ytm=7.25%

Coupon payment=Coupon rate*Face value

1185.41=Annual Coupon payment*((1-(1/(1+.0725)^13))/.0725)+1000/(1+.0725)^13

Solving we get Annual Coupon payment=94.99986

Thus coupon rate=94.99986/1000=.09499986

**Thus Coupon rate =9.5%**

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answered by: anonymous

Beam Inc. bonds are trading today for a price of $1,185.41. The
bond currently has 13 years until maturity and has a yield to
maturity of 7.25%.
The bond pays annual coupons and the next coupon is due in one
year. What is the coupon rate of the bond? (round to one decimal
place.)

Beam Inc. bonds are trading today for a price of $1,161.72. The
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maturity of 7.63%. The bond pays annual coupons and the next
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bond?

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18
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The bond pays annual coupons and the next coupon is due in one
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2....

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format so that 12.34% would be entered as .1234 and 0.98% would be
entered as .0098.
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