What is the coupon rate for a bond with 3 years until maturity, a price of S 1,0

Question

What is the coupon rate for a bond with 3 years until maturity, a price of S 1,053.46, and a yield to maturity of 6%? ? 6% ? 8% 0 1096 O 11% If a bond is priced at par value, then: (Points: 4) 0 it has a very low level of default risk. O its coupon rate equals the market rate. O it must be a zero-coupon bond. O the bond is very close to maturity. what is the amount of the annual coupon payment for a bond that has 6 years until maturity, sells for $1,050 and has a yield to maturity of 10.5%? O $116.65 O $93.70 $110.24 O $105.00 O $121.73

Explanation / Answer

(1) Let the annual coupon be $ K. Bond Price = $ 1053.46, YTM = 6 % and Time to Maturity = 3 years, Par Value = $ 1000.

Therefore, 1053.46 = K x (1/0.06) x [1-{1/(1.06)^(3)}] + 1000 / (1.06)^(3)

213.84 = K x (1/0.06) x [1-{1/(1.06)^(3)}]

K = $ 79.99 or $ 80

Coupon Rate = Annual Coupon / Par Value = 80 / 1000 = 0.08 or 8 %

Hence, the correct option is (b).

NOTE: Please raise separate queries for solutions to the remaining unrelated questions.

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