Question

Sunshine mining bonds have a $1,000 face value, pay $95 annual interest, mature in 2020, and are currently quoted at $1,302.50. the coupon rate of the bond is:

Answer 1

The coupon rate of the Sunshine mining bonds is 9.5%, as it is determined by dividing the $95 annual interest payment by the $1,000 face value.

Step-by-step explanation:

The coupon rate of a bond is calculated by dividing the annual interest payment by the face value of the bond. For the Sunshine mining bonds, which pay $95 annual interest on a $1,000 face value, the coupon rate would be calculated as follows:

Coupon Rate = Annual Interest Payment / Face Value

Coupon Rate = $95 / $1,000 = 0.095 or 9.5%

Therefore, the coupon rate of the Sunshine mining bonds is 9.5%. It's important to note that the current price of the bond in the market (quoted at $1,302.50) is irrelevant to the calculation of the coupon rate, which is based solely on the face value and the amount of annual interest paid.

Answer 2

The coupon rate of the sunshine mining bonds is 7.29%. Coupon rate is figured by dividing the par value ($1302.50) by the annual interest (yield). If the face value of the bond was only given as well as the annual interest, the coupon rate of the bond would be 9.5%.