Question

6 Collecting Coupons Assume that a bond sells for $948; it has semi-annual coupons, a maturity of 8 years, yields 5.1%, and has a face value of $1,000. What is the coupon rate of this bond?

Answer 1

948 1000 Present value Par value Term No. of periods in a year YTM Coupon payment per period since it has a semi annual coupons 5.10% $21.50 EPMT(YTM/no.of periods in a year,term*no.of periods in a year, present value*-1, future value,o) =PMT(5.1%/2,8*2,-948, 1000,0) O is used as it is assumed that the coupon payments are made at the end of each period If coupon payments are made at the beginnng of period, change 'o' to 'l' in the formula Total coupon paid in a year Coupon rate 43.00 =Coupon payment per period*No. of periods in a year 4.30% =No. of periods in a year/par value