Ashes Divide Corporation has bonds on the market with 19 years to maturity, a YT

Question

Ashes Divide Corporation has bonds on the market with 19 years to maturity, a YTM of 10.0 percent, and a current price of $1,156.50. The bonds make semiannual payments. What must the coupon rate be on these bonds? (Do not round your intermediate calculations.)

rev: 09_18_2012

23.74%

10.25%

20.53%

11.96%

11.86%

Ashes Divide Corporation has bonds on the market with 19 years to maturity, a YTM of 10.0 percent, and a current price of $1,156.50. The bonds make semiannual payments. What must the coupon rate be on these bonds? (Do not round your intermediate calculations.)

Explanation / Answer

Face value (FV) $                                         1,000 Number of compounding periods per year 2 Number of years to maturity 19 Number of compounding periods till maturity (NPER) 38 Market rate of return/Required rate of return 10.00% Market rate of return/Required rate of return per period (RATE) 5.00% Bond price (PV) $                               (1,156.500) Coupon payment (PMT) PMT(RATE,NPER,PV,FV) Coupon payment (PMT) $59.28 Coupon rate (Coupon payment×Compoundings per year )÷FV 11.86%

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