Question

A bond has a par value of $1,000, a current yield of 6.453 percent, annual interest payments, and 8 years to maturity. The bond quote is $929.76. What is the amount of each coupon payment?

a. $30.00
b. $32.27
c. $60.00
d. $62.50
e. $64.53

Answer 1

Annual coupon payment = $599.97

Step-by-step explanation:

Current yield = 6.453%

Price of bond = Bond quote / 100 * par value

Price of bond = 929.76 / 100 * 1000

Price of bond = 9297.6

The formula for current yield is: Current yield = annual coupon payment / bond price

6.453% = Annual coupon payment / 9297.6

Annual coupon payment = 6.453% * 9297.6

Annual coupon payment = 599.974128

Annual coupon payment = $599.97