Question

a 12 year annual coupon bond is priced at 1,102.60. The bond has a 1,000 face value and a YTM of 5.33%. what is the coupon rate? Please show be how to solve with financial calculator or if not possible, step by step.

Answer 1

K = Nx2

Bond Price =∑ [(Semi Annual Coupon)/(1 + YTM/2)^k]     +   Par value/(1 + YTM/2)^Nx2

k=1

K =12x2

1102.6 =∑ [(Coupon rate*1000/200)/(1 + 5.33/200)^k]     +   1000/(1 + 5.33/200)^12x2

k=1

Coupon rate% = 6.5

N = 12

PV = -1102.6

I/Y = 5.33

FV = 1000

CPT PMT

PMT = 65

Coupon rate = PMT/Par value*100 = 65/1000*100 = 6.5%