A 5-year Circular File bond pays interest of $45 annually and sells for $964. Wh

Question

A 5-year Circular File bond pays interest of $45 annually and sells for $964. What are its coupon rate and yield to maturity? (Do not round intermediate calculations. Round "Coupon rate" to 1 decimal place and "Yield to maturity" to 2 decimal places.)

A 5-year Circular File bond pays interest of $45 annually and sells for $964. What are its coupon rate and yield to maturity? (Do not round intermediate calculations. Round "Coupon rate" to 1 decimal place and "Yield to maturity" to 2 decimal places.)

Explanation / Answer

coupon rate = 45/1000 = 4.5%

964 = 45*PVIFA(YTM,5) + 1000/(1+YTM)^5

YTM = 5.34%

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