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A seven-year, semiannual coupon bond is selling for $1,036.73. The bond has a face value of...

  1. A seven-year, semiannual coupon bond is selling for $1,036.73. The bond has a face value of $1,000 and a yield to maturity of 7.11%. What is the coupon rate?

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Homework Answers

Answer #1

Face/Par Value of bond = $1000

No of Coupon Payments = No of years to maturity*2 = 7 years*2

= 14

Semi-annually YTM = 7.11%/2 = 3.555%

Calculating the Market price of Bond:-

Coupon Payment = $38.9258

So, Semi-annaul Coupon Payment is $38.9258

Annual Coupon rate = (Semi-annaul Coupon Payment*2)/Face Value

Annual Coupon rate =($38.9258*2)/$1000

Annual Coupon rate = 7.79%

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