**Question for Educational Website:**Torres Enterprises' non-callable bonds currently sell for $655.90. They have a 10-year maturity with a yield to maturity of 12%. What is the company's coupon rate? (Semi-annually compounding)**Options:**1. 5.50%2. 8.70%3. 10.50%4. 6.00%5. 10%**Explanation:**To determine the coupon rate, consider that this is a problem of finance involving bond pricing. You are given the current selling price of the bond, its yield to maturity (YTM), and the compounding frequency. The coupon rate is the interest paid by the bond annually as a percentage of the bond's face value.In this problem, because the compounding is semi-annual, the yield to maturity and the coupon rate must be considered as semi-annual figures for calculation, requiring specific financial formulas or a financial calculator to find the exact coupon rate.

Using excel PMT function, =PMT(rate,nper,pv,fv) Where rate = rate per period i.e. 12%/2 nper = no. of compounding periods i.e. 10*2 =20 pv = price of the bond = -655.90 fv = face value of the bond = 1000Semiannual coupon =$30 Annual coupon = $30*2 =$60 Coupon rate = annual coupon/ face value = $60/$1000 coupon rate =6% The correct answer is option D i.e. 6%

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Torres Enterprises' non-callable bonds currently sell for $655.90. They have a 10 year maturity with yield to maturity of 12%. What is the company's coupon rate? (Semi-annually compounding) 1) 5.50% O 2) 8.70% 3) 10.50% O 4) 6.00% 5) 10%

Torres Enterprises' non-callable bonds currently sell for $655.90. They have a 10 year maturity with yield to maturity of 12%. What is the company's coupon rate? (Semi-annually compounding) 1) 5.50% O 2) 8.70% 3) 10.50% O 4) 6.00% 5) 10%

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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