Question

Item3 0.5 points eBookPrintReferences Check my work Check My Work button is now enabledItem 3Item 3 0.5 points Problem 7-5 Coupon Rates [LO2] Gabriele Enterprises has bonds on the market making annual payments, with ten years to maturity, a par value of $1,000, and selling for $956. At this price, the bonds yield 6.3 percent. What must the coupon rate be on the bonds

Answer 1

5.694%

Step-by-step explanation:

We use the PMT formula to determine the coupon rate i.e to be shown in the attachment below:

Given that,

Present value = $956

Future value or Face value = $1,000

RATE = 6.3%

NPER = 10 years

The formula is shown below:

= Rate(NPER;PMT;-PV;FV;type)

The present value come in negative

So, after solving this, the PMT is $56.94

Now the coupon rate is

= $56.94 ÷ $1,000

= 5.694%