Final answer:
A 5-year bond with a price of $900 and a yield to maturity of 6% would have an annual coupon payment of $54 and a coupon rate of 5.4%.
Step-by-step explanation:
When determining the price of a bond with annual coupons, the yield to maturity is a critical factor. In this scenario, we have a 5-year bond with a price of $900 and a yield to maturity of 6%.
To calculate the annual coupon payment, we need to divide the yield to maturity by 100 and multiply it by the bond price. In this case, the annual coupon payment would be ($900 * 6%) = $54.
Since this bond has a face value of $1,000, we also need to calculate the coupon rate. The coupon rate is the annual coupon payment divided by the face value, or ($54 / $1,000) = 0.054 or 5.4%.