Big Canyon Enterprises has bonds on the market making annual payments, with 12 years to maturity, a par value of $1,000, and a price of $1,030. At this price, the bonds yield 6.14 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.)

Question

Leonidas

Business

19 June, 07:20

Big Canyon Enterprises has bonds on the market making annual payments, with 12 years to maturity, a par value of $1,000, and a price of $1,030. At this price, the bonds yield 6.14 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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Answers (1)

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Berger · Answer 1

6.32%

Explanation:

Bonds yield amount = $1,030 * 6.14% = $63.242

Coupon rate = Bond yield amount : Par value of the bond = $63.242 : $1,000 = 0.063242, or 6.32%

Therefore, the coupon rate on the bonds must be 6.32%.