Question

Kiss the Sky Enterprises has bonds on the market making semiannual payments, with 18 years to...

Kiss the Sky Enterprises has bonds on the market making semiannual payments, with 18 years to maturity, and selling for $1064. At this price, the bonds yield 7.0 percent. What must the coupon rate be on the bonds? Enter the answer with 4 decimals (e.g. 0.0123)

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Answer #1

Bond Value = PV of Cash flows arising from it.

Let X be the coupon amount per period

Thus 289.80+20.2905X = $ 1064

20.2905X = $ 774.2

X = $ 38.16

Coupon amount per period = $ 38.16

Coupon amount per anum = $ 38.16 * 12/6

= $ 76.31

Coupon rate = Coupon amount per anum / Face Value

= $ 76.31 / $ 1000

= 0.0763 i.e 7.63%

Pls commment, if any further assistance is required.

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