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?

Question

Savanah Ellis

Business

3 August, 06:27

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?

+2

Answers (1)

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Shaffer · Answer 1

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%

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?

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?