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You are considering the purchase of a 40-year original maturity, semi-annual coupon bond that was issued...

You are considering the purchase of a 40-year original maturity, semi-annual coupon bond that was issued 12 years ago. The bond presently has an annual yield to maturity of 12 percent. If the bond’s current market value is $1,186.99, what is the bond’s annual coupon rate?

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Answer #1

rate positively ..

we have to use financial calculator to solvet this
put in calculator
FV 1000
PV -1186.99
I 12%/2 6%
N (40-12)*2 56
compute PMT $71.67
coupon rate = 71.67*2/1000
14.33%
Annual coupon rate = 14.33%
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