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23 February, 00:50

Smiley Industrial Goods has bonds on the market making annual payments, with 13 years to maturity, and selling for $1,095. At this price, the bonds yield 6.4 percent. What must the coupon rate be on these bonds?

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  1. 23 February, 01:01
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    Answer: The coupon rate should be at 7.5%

    Explanation: Couple payment is the payment receives annually by the bondholder on a bond from the day of its issuance till it reaches its maturity.

    Couple rate = Sum of couple paid per year / bond face value. Usually expressed in percentage.
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