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4 April, 16:08

The current price of a 10 year $1000 par value bond is $1158.91. Interest on this bond is paid every 6 months, and the nominal annual yield is 14%, Given these facts, what is the annual coupon rate on this bond

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  1. 4 April, 17:49
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    16.22%

    Explanation:

    To calculate the annual coupon rate, you can use the following formula:

    Coupon Rate = (Annual coupon payment/Par value of the bond) * 100%

    Annual coupon payment = $1158.91*14% = 162.2

    Par value of the bond = $1000

    Coupon Rate = (162.2/1000) * 100%

    Coupon Rate=0.1622*100%

    Coupon Rate = 16.22%

    The annual coupon rate on this bond is 16.22%
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