30 November, 09:46

McConnell Corporation has bonds on the market with 15.5 years to maturity, a YTM of 6.2 percent, a par value of \$1,000, and a current price of \$1,039. The bonds make semiannual payments.What must the coupon rate be on these bonds?

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Answers (1)
1. 30 November, 10:34
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Coupon rate is 6.4%

Explanation:

The coupon payment on a bond can be computed from a formula of current price of a bond

current price of a bond=coupon amount/yield to maturity

coupon amount=current price * yield to maturity

current price is \$1039

yield to maturity is 6.2%

coupon rate = \$1039*6.2%

=\$64.42

Coupon rate=coupon amount/par value of bond

coupon amount \$64.42

par value of bond=\$1000

coupon rate = \$64.42/\$1000

=6.4%
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