Question

A 6-year Circular File bond with a face value of $1,000 pays interest once a year of $80 and sells for $986. a.What are its coupon rate and yield to maturity? (Do not round intermediate calculations. Enter the coupon rate as a percent rounded to 1 decimal place and the yield to maturity as a percent rounded to 2 decimal places.) Coupon rate % Yield to maturity % b.If Circular wants to issue a new 6-year bond at face value, what coupon rate must the bond offer? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Coupon rate %

Answer 1

Answer:

a.What are its coupon rate and yield to maturity?  

The coupon rate it's 8%. and the yield to maturity it's 8,31%.

 b.If Circular wants to issue a new 6-year bond at face value, what coupon rate must the bond offer?  

A coupon rate of 8,19%.  

Explanation:

• What are its coupon rate and yield to maturity?  

The coupon rate it's 8% this is $80 at the price of $1,000, and the yield to maturity it's 8,31% which is the $80 received from the cupoun rate of $986 as price plus the $1,000 at the maturity.  

• If Circular wants to issue a new 6-year bond at face value, what coupon rate must the bond offer?  

If the company wants to offer a bond at the face value of $1,000 it's needed to offer a coupon rate of 8,19%, which arise from the value that the bond holder get today with the actual price.