Question

Bryant Inc. just issued $1,000 par 30-year bonds. The bonds sold for $1,107.20 and pay interest semiannually. Investors require a rate of 7.75% on the bonds. What is the bonds' coupon rate

Answer 1

8.68%

Step-by-step explanation:

For determining the coupon rate first determined the PMT

Given that

Future value = $1,000

NPER = 30 × 2 = 60

RATE = 7.75% ÷ 2 = 3.875%

Present value = $1,107.20

The formula is shown below:

=PMT(RATE;NPER;-PV;FV;TYPE)

The present value comes in negative

After applying the above formula, the monthly payment is $43.38

The annual monthly payment is

= $43.88 × 2

= $86.75

Now the coupon rate is

= $86.75 ÷ $1,000

= 8.68%