Question

please tell me the steps to solve on financial calculator if possible. a six year semi annual coupon bond is selling for 991.38. the bond has a face value of 1,000 and a yield to matuirity of 9.19 percent. what is the coupon rate?

Answer 1

Information provided:

Face value= future value= $1,000

Present value= $991.38

Time= 6 years*2= 12 semi-annual periods

Yield to maturity= 9.19%/2= 4.5950% per semi-annual period

The following has to be entered in a financial calculator to calculate the coupon payments:

FV= 1,000

PV= -991.38

N= 12

I/Y= 4.5950

Press the CPT key and PMT key to calculate the coupon payment.

The value obtained is $44.9995 $45 for a semi-annual period.

The annual coupon payment is $45*2= $90.

Coupon rate= Coupon payment/ Face value

                        = $90/ $1,000

                        = 0.09 9%.

Therefore, the coupon rate is 9%.