Question

A bond sells for $1215 in the market and has 12 years until maturity. The bond's...

A bond sells for $1215 in the market and has 12 years until maturity. The bond's YTM = 9.19% and pays its coupons annually. What is the bond's annual coupon rate?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Current price=annual coupon*Present value of annuity factor(9.19%,12)+$1000*Present value of discounting factor(9.19%,12)

1215=annual coupon*7.092693876+1000*0.348181432

annual coupon=(1215-348.181432)/7.092693876

annual coupon=$122.21(Approx)

Hence coupon rate=annual coupon/Face value

=($122.21/1000)

=12.22%(Approx).

NOTE:

1.Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate

=annual coupon[1-(1.0919)^-12]/0.0919

=annual coupon*7.092693876

2.Present value of discounting factor=1000/1.0919^12

=1000*0.348181432

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Question 6.21 Yield to maturity – The Egoli company bond currency sells for R955, has a...
Question 6.21 Yield to maturity – The Egoli company bond currency sells for R955, has a 12% coupon interest rate And a R1000 par value pays interest annually and has 15 years to maturity a.Calculate the yield to maturity (YTM) on this bond b.Explain the relationship that exists between the coupon interest rate and yield to maturity and between the par value and market value of a bond
Stealers Wheel Software has 8 percent coupon bond on the market with 10 years to maturity,...
Stealers Wheel Software has 8 percent coupon bond on the market with 10 years to maturity, and the par value of $1,000. The bonds make semi-annual coupon payments and currently sell for $980. What is the YTM? If the bond with the same maturity and similar risk pays 6% annual coupon (pays semi-annually), what should be the market price of the second bond?
A bond has a face value of $1000 with a time to maturity ten years from...
A bond has a face value of $1000 with a time to maturity ten years from now. The yield to maturity of the bond now is 10%. a) What is the price of the bond today, if it pays no coupons? b) What is the price of the bond if it pays annual coupons of 8%? c) What is the price today if pays 8% coupon rate semi-annually?
A bond has 8 years until maturity, carries a coupon rate of 8%, and sells for...
A bond has 8 years until maturity, carries a coupon rate of 8%, and sells for $1,100. What is the yield to maturity if interest is paid once a year? A. 6.3662% B. 9.146% C. 5.048% D. None of these A bond has 8 years until maturity, carries a coupon rate of 8%, and sells for $1,100. What is the current yield on the bond? A. 7.27% B. 9.14% C. 5.04% D. None of these
Assume a discount bond has a few years until maturity and a positive yield. All else...
Assume a discount bond has a few years until maturity and a positive yield. All else constant, the bond's yield to maturity is A. directly related to the time to maturity. B. equal to the coupon rate. C. inversely related to the bond's market price. D. unrelated to the time to maturity. E. less than its coupon rate.
1. A 4% coupon bond with 6 months remaining until maturity is currently trading at $997.78....
1. A 4% coupon bond with 6 months remaining until maturity is currently trading at $997.78. Assume semi-annual coupon payments. The bond's YTM is__________%. Do not round any intermediate work. Round your *final* answer to 2 decimal places (example: .1234567 = 12.35). Do not enter the % sign. 2. A bond with 9 years left to maturity is trading for $1010. It pays coupons semiannually. Its YTM is currently 3.6%. The coupon rate for this bond must be ________%. Do...
Suppose that General Electric has a bond issue that has 10 years until maturity. The bond...
Suppose that General Electric has a bond issue that has 10 years until maturity. The bond pays a 6.00% annual coupon rate and has a face value of $1,000. If the bond currently trades at $1,075.00, what is the yield to maturity on the bond?
A Treasury bond with two yeas until maturity has a par value of $100 and pays...
A Treasury bond with two yeas until maturity has a par value of $100 and pays semiannual coupons at a rate of 4% per annum. Given the zero rates below, determine the market price of the bond. Par Maturity (years) Annual Coupon Price 100 0.5 0 98 100 1 4 99
bond has $1,000 face value, 25 years to maturity, 3.6% annual coupon rate. The bond’s current...
bond has $1,000 face value, 25 years to maturity, 3.6% annual coupon rate. The bond’s current price is $948.92. Assuming the bond pays coupons semiannually, what is the bond’s yield to maturity (YTM)?
What is the coupon rate for a bond with 3 years until maturity, a current market...
What is the coupon rate for a bond with 3 years until maturity, a current market price of 1,053.46 and a yield to maturity of 6%? Interest is paid annually.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT