A 6-year Circular File bond with a face value of $1,000 pays interest once a year of $80 and sells for $986. a. What are its coupon rate and yield to maturity? (Do not round intermediate calculations. Enter the coupon rate as a percent rounded to 1 decimal place and the yield to maturity as a percent rounded to 2 decimal places.) Coupon rate % Yield to maturity % b. If Circular wants to issue a new 6-year bond at face value, what coupon rate must the bond offer? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Coupon rate %

Question

Business

Joel Miranda

27 December, 17:47

A 6-year Circular File bond with a face value of $1,000 pays interest once a year of $80 and sells for $986. a. What are its coupon rate and yield to maturity? (Do not round intermediate calculations. Enter the coupon rate as a percent rounded to 1 decimal place and the yield to maturity as a percent rounded to 2 decimal places.) Coupon rate % Yield to maturity % b. If Circular wants to issue a new 6-year bond at face value, what coupon rate must the bond offer? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Coupon rate %

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Answers (1)

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Nikhil Stevens · Answer 1

a. What are its coupon rate and yield to maturity?

The coupon rate it's 8%. and the yield to maturity it's 8,31%.

b. If Circular wants to issue a new 6-year bond at face value, what coupon rate must the bond offer?

A coupon rate of 8,19%.

Explanation:

What are its coupon rate and yield to maturity?

The coupon rate it's 8% this is $80 at the price of $1,000, and the yield to maturity it's 8,31% which is the $80 received from the cupoun rate of $986 as price plus the $1,000 at the maturity.

If Circular wants to issue a new 6-year bond at face value, what coupon rate must the bond offer?

If the company wants to offer a bond at the face value of $1,000 it's needed to offer a coupon rate of 8,19%, which arise from the value that the bond holder get today with the actual price.