Question

Assume that today's date is February 15, 2015. Robin Hood Inc. bond is an annual-coupon bond. Par value of the bond is $1,000. Calculate annual coupon interest payments. Price: 118.806 Coupon Rate: 7.272 Maturity Date: 2-15-2021 Rating: D

Answer 1

Calculate the price of the bond:

Price in the second column (118.806) is the price per each $100 of par value. Par value of the bond is $1000, so the current price of the bond in dollars is

($1000/100) *118.806 = 10* 118.806 = $1,188.06

Calculate annual coupon payments:

Coupon rate is 7.272%

Par value of the bond is $1000

Coupon payment = $1000*7.272% = $72.72

Bond's current yield = Annual coupon payment/ Current price of the bond in dollars

= 72.72 / 1,188.06

= 6.12%