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18 April, 16:46

Kaiser Industries has bonds on the market making annual payments, with 14 years to maturity, a par value of $1,000, and a current price of $1,108.60. At this price, the bonds yield 7.5 percent. What is the coupon rate? Select one: a. 9.01 percent b. 8.46 percent c. 8.78 percent d. 9.32 percent e. 8.93 percent

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  1. 18 April, 17:03
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    c.) 8.78 percent

    Explanation:

    You can solve this question using a financial calculator. I am using (Texas Instruments BA II plus)

    Note: If using the same calculator as me, key in the numbers first before the function.

    Total duration of investment; N = 14

    YTM; I/Y = 7.5%

    Face value or Par value; FV = 1000

    Current Price; PV = - 1108.6

    then CPT PMT = $87.793

    Coupon payment = $87.793

    Coupon rate = (Coupon payment / Par value) * 100

    Coupon rate = (87.793/1000) * 100

    =0.08779 * 100

    = 8.779%

    Therefore, the coupon rate = 8.78%
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Home » Business » Kaiser Industries has bonds on the market making annual payments, with 14 years to maturity, a par value of $1,000, and a current price of $1,108.60. At this price, the bonds yield 7.5 percent. What is the coupon rate? Select one: a. 9.01 percent b.
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