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Elanso [62]
4 years ago
8

Dma corporation has bonds on the market with 19.5 years to maturity, a ytm of 6.6 percent, and a current price of $1,043. the bo

nds make semiannual payments and have a par value of $1,000. what must the coupon rate be on these bonds? (do not round intermediate calculations. enter your answer as a percent rounded to 2 decimal places,
e.g., 32.16.)
Business
1 answer:
Sonbull [250]4 years ago
6 0
Given:
<span>bonds on the market with 19.5 years to maturity
</span><span>a yield to maturity of 6.6%,
current price of $1,043
face value of $1,000

YTM = Coupon payment / current price
6.6% = Coupon payment / 1,043
6.6% * 1,043 = Coupon payment
68.838 = coupon payment

Coupon rate = Coupon payment / Face Value
Coupon rate = 68.838 / 1,000
Coupon rate = 0.068838 or 6.88%

The coupon rate of DMA Corporation's bonds is 6.88%. 

Regardless of its price in the market, each bond will have 68.838 annual interest payment or 34.419 semi annual payments.</span>
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