Answer:
The annual yield to maturity of the bond is 12%, which means that the bond's cash flows are discounted at a rate of 12% per year. The bond has a 15-year maturity and a $1,000 face value, so it will make 15 annual payments of the same amount. We can use the present value formula to solve for the annual coupon payment:
PV = C / (1 + r)^1 + C / (1 + r)^2 + ... + C / (1 + r)^15 + FV / (1 + r)^15
where PV is the current price of the bond, C is the coupon payment, r is the yield to maturity, and FV is the face value of the bond.
Plugging in the given values:
PV = $659.46
FV = $1,000
r = 12%
n = 15
Solving for C, we get:
C = (PV - FV / (1 + r)^n) / [((1 + r)^n - 1) / r]
C = ($659.46 - $1,000 / (1 + 0.12)^15) / [((1 + 0.12)^15 - 1) / 0.12]
C = $79.14
Therefore, the annual coupon payment on this bond is $79.14, which is closest to answer choice d. $79.14.