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Wheeler's has bonds on the market with 13 years to maturity, a YTM of 7.6 percent, and a current price of $901.98. The bonds make semiannual payments and have a face value of $1,000. What is the coupon rate?

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emmanuelkossy

Answer:

The coupon rate is 6.40 percent.

Explanation:

From the data provided we have;

Years to maturity = 13 years

Yield to maturity = 7.6 percent

Current price = $901.98

Face value = $1000

Bond price = C × [(1 - {1 / [1 + (.076 / 2)](13 × 2)}) / (.076 / 2)] + $1,000 / [1 + (.076 / 2)](13 × 2)

C = $32.00

coupon rate = (C × 2)/face value

Coupon rate = ($32 × 2) / $1,000 = .0640

Coupon rate = 6.40 percent

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