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Consider the following bond where the coupons are paid semi-annually, Bond HSBC Price $957
Consider the following bond where the coupons are paid semi-annually,
Bond HSBC Price $957.25 IYTM 3% Nears to maturity 5 years
What is the coupon rate of this bond? Enter your answer as a percentage. Do not enter the percentage sign in your answer.
Enter your response below. Enter your answer rounded to 2 DECIMAL PLACES.
Number
0/0
Expert Solution
First we calculate Coupon Payment using PMT Function in Excel:
=pmt(rate,nper,-pv,fv)
Here,
PMT = Coupon Payment = ?
Rate = 3%
Nper = 5 years
PV = $957.25
FV = $1,000 (assumed)
Substituting the values in formula:
=pmt(3%,5,-957.25,1000)
PMT or Coupon Payment = $20.67
Now we calculate Coupon Rate:
Coupon Rate = Coupon Payment/Face Value
= $20.67/$1,000
Coupon Rate = 2.067%
So, Coupon Rate is 2.067.
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