There is a semiannual coupon bond with the following info. What is this bond’s coupon rate? (Show Work) Par= $5,000 Price= $4,800 YTM=6% 5 years until maturity Note: YTM and coupon rate are always annual.
There is a semiannual coupon bond with the following info. What is this bond’s coupon rate? (Show Work) Par= $5,000 Price= $4,800 YTM=6% 5 years until maturity Note: YTM and coupon rate are always annual.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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- There is a semiannual coupon bond with the following info. What is this bond’s coupon rate? (Show Work)
Par= $5,000
Price= $4,800
YTM=6%
5 years until maturity
Note: YTM and coupon rate are always annual.
Expert Solution
Step 1
The coupon rate of interest is different from the yield to maturity. The YTM represents the actual rate f return provided by a bond assuming the bond is held till maturity who makes all interest and principal payments. The coupon rate is the interest rate that a bond pays. The coupon rate is the fixed interest rate on a band.
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