Large Industries bonds sell for $1,068.02. The bond life is 9 years, and the yie

Question

Large Industries bonds sell for $1,068.02. The bond life is 9 years, and the yield to maturity is 6.0%. What must be the coupon rate on the bonds? Assume coupons are paid once a year and the face value is $1,000. (Do not round intermediate calculations. Enter your response as a percentage rounded to one decimal place.)

Large Industries bonds sell for $1,068.02. The bond life is 9 years, and the yield to maturity is 6.0%. What must be the coupon rate on the bonds? Assume coupons are paid once a year and the face value is $1,000. (Do not round intermediate calculations. Enter your response as a percentage rounded to one decimal place.)

Explanation / Answer

Bond selling rate =1068.02 dollars

Bond life =9 years

Yield to maturity =6%

ASSUMING coupon rate =r

Bond selling rate=coupon rate *face value *(1-(1+.06)^-9)/.06+face value/1.06^(

1068.02=r*1000*(1-1.06^-9)/0.06 + 1000/1.06^9

COUPON RATE =7%

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