Question

Page Enterprises has bonds on the market making annual payments, with eight years to maturity, and selling for $1097.89. At this price, the bonds yield 2.6 percent. What must the coupon rate be on the bonds? (Enter your answer as a percentage, omit the "%" sign in your response, and enter your answer with two decimal places. For example, 1.214% should be entered as 1.21.)

Answer 1

Calculate the coupon payment as follows:

Therefore, the coupon payment is 39.71.

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Calculate the coupon rate as follows:

Coupon rate = Coupon payment / Face value

= $39.71 / $1,000

= 3.97%

Therefore, the coupon rate is 3.97.