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padilas [110]
3 years ago
13

Kaiser Industries has bonds on the market making annual payments, with 14 years to maturity, a par value of $1,000, and a curren

t price of $1,108.60. At this price, the bonds yield 7.5 percent. What is the coupon rate? Select one: a. 9.01 percent b. 8.46 percent c. 8.78 percent d. 9.32 percent e. 8.93 percent
Business
1 answer:
Mandarinka [93]3 years ago
6 0

Answer:

c.) 8.78 percent

Explanation:

You can solve this question using a financial calculator. I am using (Texas Instruments BA II plus)

<em>Note: If using the same calculator as me, key in the numbers first before the function .</em>

Total duration of investment ;N = 14

YTM ; I/Y  = 7.5%

Face value or Par value; FV = 1000

Current Price; PV = -1108.6

then CPT PMT = $87.793

Coupon payment = $87.793

Coupon rate = (Coupon payment / Par value) *100

Coupon rate = (87.793/1000) * 100

                    =0.08779 *100

                    = 8.779%

Therefore, the coupon rate = 8.78%

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