Essary Enterprises has bonds on the market making annual payments, with eight ye

Question

Essary Enterprises has bonds on the market making annual payments, with eight years to maturity, a par value of $1,000, and selling for $952. At this price, the bonds yield 6.1 percent. What must the coupon rate be on the bonds? Essary Enterprises has bonds on the market making annual payments, with eight years to maturity, a par value of $1,000, and selling for $952. At this price, the bonds yield 6.1 percent. What must the coupon rate be on the bonds? Essary Enterprises has bonds on the market making annual payments, with eight years to maturity, a par value of $1,000, and selling for $952. At this price, the bonds yield 6.1 percent. What must the coupon rate be on the bonds?

Explanation / Answer

Essary Enterprises has bonds on the market making annual payments, with eight years to maturity, a par value of $1,000, and selling for $952. At this price, the bonds yield 6.1 percent. What must the coupon rate be on the bonds?

Coupon Amount = pmt(rate,nper,pv,fv)

Coupon Amount = pmt(6.1%,8,-952,1000)

Coupon Amount = $ 53.24

Coupon rate =Coupon Amount/Face Value

Coupon rate = 53.24/1000

Coupon rate = 5.32%

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