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A fixed coupon bond with 10 years left until maturity and a coupon that is paid semi-annually is currently trading at a yield of 6%. If the price of the bond is $1,223.16, then the coupon rate is ____%.
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14 votes
14 votes
A fixed coupon bond with 10 years left until maturity and a coupon that is paid semi-annually is currently trading at a yield of 6%. If the price of the bond is $1,223.16, then the coupon rate is ____%. Par value is $1,000.

User Necker
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1 Answer

21 votes
21 votes

Answer:

9%

Step-by-step explanation:

FV = 1000

No of compounding period = 2

No of years = 10

Nper = 20

Yield to maturity = 6%/2 = 3%

PV = 1223.16

Coupon payment = PMT(Rate, Nper, Pv, Fv)

Coupon payment = $45

Coupon rate = Coupon payment * Compounding per year / FV

Coupon rate = $45 * 2 / 1000

Coupon rate = 0.09

Coupon rate = 9%

User Jmng
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