Why Choose Us?
0% AI Guarantee
Human-written only.
24/7 Support
Anytime, anywhere.
Plagiarism Free
100% Original.
Expert Tutors
Masters & PhDs.
100% Confidential
Your privacy matters.
On-Time Delivery
Never miss a deadline.
Barnes Co
Barnes Co. has bonds on the market making annual payments, with 15 years to maturity, a par value of $1,000, and a price of $847.44. At this price, the bonds yield 8.5 percent. What must the coupon rate be on the bonds?
Expert Solution
First, let's find the annual coupon payment on the bond given the following:
Par value of the bond is $1,000
FV = 1,000
The price of the bond is $847.44
PV = -847.44
Negative sign indicates cash out flow
Years to maturity, N = 15
Yield to maturity of the bond is 8.5%
I/Y = 8.5
So, we have:
FV = 1000
PV = -847.44
N = 15
I/Y = 8.5
CPT PMT
PMT = $66.628654
Annual coupon = $66.628654
The coupon rate on the bond = Annual coupon/FV
Using the values from above,
The coupon rate = 66.628654/1,000
The coupon rate = 0.066628654
The coupon rate = 6.6628654%
Archived Solution
You have full access to this solution. To save a copy with all formatting and attachments, use the button below.
For ready-to-submit work, please order a fresh solution below.
