Question

A firm has issued $1000 par 10 year bond the bond sold for $1,223.16 and pay interest semi annual investors require a rate of 6% on the bonds what is a bonds coupon rate

Answer 1

Par value=$1000
Present value =$1,223.16
Annual yield to maturity is 6%, so semiannual yield to maturity is 6%/2=3%
Time period is 10 years, as the interest is paid semiannually, the number of periods is 10 multiplied by 2 that is equal to 20.
With the given values, we can determine the semiannual coupon payment using excel as:

So, the semiannual coupon payment is $45.00
=>Annual coupon payment=$45*2=$90
Coupon payment=(Coupon rate)*(Par value)
=>Coupon rate=(Coupon payment)/(Par value)=$90/$1000=9.00%

Answer: 9.00%