Question

ABC currently has 21 long-term bond issues outstanding with various times-to-maturity and coupon rates. One of these bonds matures on May 4, 2031, approximately 15 years from today. It has a yield to maturity of 4.8%. For simplicity, assume that coupons are paid annually. The bond is currently selling for $1,105, based on a face (par) value of $1,000. What is the coupon rate? show all steps by hand please

Answer 1

Par/Face value	1000
Present Value = Future value/ ((1+r)^t)
where r is the interest rate that is .048 and t is the time period
price of the bond = sum of present values of future cash flows
price of bond	1105
r	0.048
Use excel to find the annual coupon rate
mt	1	2	3	4	5	6	7	8	9	10	11	12	13	14	15
future cash flow	58	58	58	58	58	58	58	58	58	58	58	58	58	58	1058
present value	55.34351	52.80869	50.38998	48.08204	45.87981	43.77844	41.77332	39.86004	38.03439	36.29236	34.63011	33.044	31.53053	30.08639	523.6805
sum of present values	1105
The coupon rate is 5.8%.