Question

Garrett Company's outstanding bonds have a $1,000 par value, and they mature in 25 years. Their nominal annual yield to maturity is 6.40%. They pay interest semiannually, and sell at a price of $875. What is the bond's nominal coupon interest rate? 

Your answer should be between 4.25 and 9.10, rounded to 2 decimal places, with no special characters.

Answer 1

Step-1:Calculation of annual coupon payment
Annual coupon payment	=pmt(rate,nper,pv,fv)*2	Where,
	= $    53.91			rate	=	0.032
				nper	=	50
				pv	=	$   -875.00
				fv	=	$ 1,000.00
Step-2:Calculation of Coupon Rate
Coupon Rate	=	Annual coupon	/	Face Value
	=	$    53.91	/	$ 1,000.00
	=	5.39%