Homework question Help

Business & Finance
Tutor: None Selected Time limit: 1 Day

IBM Inc. bonds are trading today for $1991.84. The bond currently has 22 years until maturity and has a yield of maturity of 3.17%. The bond pays annual coupons and the next coupon is due in 1 year. What is the coupon rate of the bond?

Jul 7th, 2015

Thank you for the opportunity to help you with your question!

When bond price = par value, coupon rate = yield to maturity

The bond price calculation can be done using this formula

P = {(C/R)*[1 – 1/(1+R)^T] + F/(1+R)^T}

P= bond price, C = coupon payment, R= yield to maturity T is time to maturity

1991.84= {(c/0.0317)*[1-0.5033]+1991.84/0.5033

c= 62.68%

Please let me know if you need any clarification. I'm always happy to answer your questions.
Jul 7th, 2015

Studypool's Notebank makes it easy to buy and sell old notes, study guides, reviews, etc.
Click to visit
The Notebank
...
Jul 7th, 2015
...
Jul 7th, 2015
Dec 6th, 2016
check_circle
Mark as Final Answer
check_circle
Unmark as Final Answer
check_circle
Final Answer

Secure Information

Content will be erased after question is completed.

check_circle
Final Answer