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McConnell Corporation has bonds on the market with 11 years to maturity, a YTM of 7.4...

McConnell Corporation has bonds on the market with 11 years to maturity, a YTM of 7.4 percent, a par value of $1,000, and a current price of $1,196.50. The bonds make semiannual payments. What must the coupon rate be on these bonds?
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Homework Answers

Answer #1

We can use the bond price formula to find the answer.

Where,
C = Periodic coupon payment,
P = Par value of bond,
r = Yield to maturity
n = Years to maturity

Substituting the known values, we get:

Therefore,

OR

Rounding to 2 decimals

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