Respuesta :
The coupon rate is 7.80% if Draiman corporation has bonds on the market with 10.5 years to maturity, a YTM of 7.1 percent, a par value of $1,000
What is the percentage?
It's the ratio of two integers stated as a fraction of a hundred parts. It is a metric for comparing two sets of data, and it is expressed as a percentage using the percent symbol.
We have:
Draiman corporation has bonds on the market with 10.5 years to maturity, a ytm of 7.1 percent.
We know,
[tex]\rm Bonds \ Price = Coupon \ payment[ (1 - \dfrac{1}{(1+r)^n} ] + \dfrac{Par \ value }{ (1 + r)^n}[/tex]
r = 7.1%/2
Since the payments are semi-annual, hence divided by 2
r = 3.55% or 0.0355
n = 10.5x2
Since the payments are semi-annual, hence multiplied by 2
n = 21
Now plug all the values in the formula to get the value of the coupon rate:
$ 1,051 = Coupon payment x [ [ (1 - 1 / (1 + 0.0355)21 ] / 0.0355 ] + $ 1,000 / 1.035521
Coupon payment = ($ 1,051 - $ 480.6709018) / 14.62898868
Coupon payment = $ 38.98
Coupon rate:
= (Coupon payment / Face value) x 2 (Multiplied by 2 since the payments were semi annual)
= ($38.98/$1,000) x 2
= 7.80%
Thus, the coupon rate is 7.80% if Draiman corporation has bonds on the market with 10.5 years to maturity, a YTM of 7.1 percent, a par value of $1,000
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