Question

Consider a bond that has a price of $233.78, a current yield of 4.28%, yield to maturity of 10%, a face value of $1000, and 20 years to maturity. What are the annual coupon payments? Round to two decimal place.

Please show the steps you take to get the answer, thanks!

Answer 1

Calculation of Annual coupon payment using current yield formula:

Current yield = Annual coupon payment / Current price

4.28% = Annual coupon payment / $233.78

Annual coupon payment = $233.78 * 4.28%

Annual coupon payment = $10.0058 or $10.01

Calculation of Annual coupon payment using excel formula:

PV = 233.78

FV = 1000

Nper = 20

Rate = 10%

Annual coupon payment can be calculated by using the following excel formula:
=PMT(rate,nper,pv,fv)
=PMT(10%,20,-233.78,1000)
= $10.00