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Big Canyon Enterprises has bonds on the market making annual payments, with 12 years to maturity, a par value of $1,000, and a price of $1,030. At this price, the bonds yield 6.14 percent. What must the coupon rate be on the bonds? (

Respuesta :

tutordamola

Answer:

The answer is 6.8percent

Explanation:

We have been asked to find the coupon payment here. It can be gotten using the below formula:

PV = PMT/(1+r)^1 + PMT/(1+r)^2 ....... PMT + FV/(1+r)^n

N = 12 years

1/Y = 6.4 percent

PV = $1030

PMT = ?

FV = $1000

Using a Financial calculator to input all the variables above, the annual PMT is $67.66

Lets convert the PMT to coupon rate which the formula is:

Coupon rate is Annual PMT /par value

= $67.66/1000

0.06766 or 6.8percent

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