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7 February, 04:07

Gabriele Enterprises has bonds on the market making annual payments, with eight years to maturity, a par value of $1,000, and selling for $952. At this price, the bonds yield 6.1 percent. What must the coupon rate be on the bonds? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e. g., 32.16.)

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  1. 7 February, 05:50
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    =5.32% (Approx)

    Explanation:

    Current price=Annual coupon*Present value of annuity factor (6.1%,8) + $1000*Present value of discounting factor (6.1%,8)

    952=Annual coupon*6.18529143+1000*0.622697222

    Annual coupon = (952-622.697222) / 6.18529143

    =$53.24 (Approx).

    Coupon rate=Annual coupon/Face value

    =$53.24/1000

    =5.32% (Approx)
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