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11 March, 17:59

What is the coupon rate for a bond with 3 years until maturity, a price of $1,053.46, and a yield to maturity of 6%? Interest is paid annually.

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  1. 11 March, 18:03
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    Coupon rate is 8%

    Explanation:

    We can ascertain the coupon rate by first of all determine the amount of coupon with pmt excel function below:

    =pmt (rate, nper,-pv, fv)

    rate is yield to maturity of 6%

    nper is the number of coupons before maturity i. e 3 annual coupons in three years

    pv is the current market price of $1,053.46

    fv is the par value of $1,000

    =pmt (6%,3,-1053.46,1000) = 80

    Coupon rate=pmt/face value=80/1000=8%
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