Question

Lei Corporation has bonds on the market with 12.5 years to maturity, a YTM of 7.2 percent, a par value of $1,000, and a current price of $1,030. The bonds make semiannual payments. What must the coupon rate be on these bonds

Answer 1

Coupon rate= 19.1%

Step-by-step explanation:

Giving the following information:

Years to maturity= 12.5 years

YTM= 7.2 percent

Par value= $1,000

Current price= $1,030

To calculate the coupon, we need to use a financial calculator:

Function= CMPD

n= 12.5

I%= 7.2

PV= -1,030

PMT= solve = $191

FV= -1,000

Now, the coupon rate:

Coupon rate= 191/1,000

Coupon rate= 19.1%