Question

Dma corporation has bonds on the market with 19.5 years to maturity, a ytm of 6.6 percent, and a current price of $1,043. the bonds make semiannual payments and have a par value of $1,000. what must the coupon rate be on these bonds? (do not round intermediate calculations. enter your answer as a percent rounded to 2 decimal places,

e.g., 32.16.)

Answer 1

Given:
bonds on the market with 19.5 years to maturity
a yield to maturity of 6.6%,
current price of $1,043
face value of $1,000

YTM = Coupon payment / current price
6.6% = Coupon payment / 1,043
6.6% * 1,043 = Coupon payment
68.838 = coupon payment

Coupon rate = Coupon payment / Face Value
Coupon rate = 68.838 / 1,000
Coupon rate = 0.068838 or 6.88%

The coupon rate of DMA Corporation's bonds is 6.88%.

Regardless of its price in the market, each bond will have 68.838 annual interest payment or 34.419 semi annual payments.