Barnes Enterprises has bonds on the market making annual payments, with 17 years to maturity, a par value of $1,000, and a price
of $969. At this price, the bonds yield 8.1 percent. What must the coupon rate be on the bonds? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
1 answer:
Answer:
7.76%
Explanation:
In this question, we use the PMT formula which is shown in the spreadsheet.
The NPER represents the time period.
Given that,
Present value = $969
Future value = $1,000
Rate of interest = 8.1%
NPER = 17 years
The formula is shown below:
= PMT(Rate;NPER;-PV;FV;type)
The present value come in negative
So, after solving this, The PMT would be $77.58
The coupon rate is shown below:
= (Coupon payment ÷ par value) × 100
= ($77.58 ÷ $1,000) × 100
= 7.76%
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