split - Find Coupon Rate

Templegirl

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Jul 19, 2010
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Someone please have mercy...I've been at this for two days now :cry:
Question:
Osbourne Corporation has bonds on the market with 10.5 years to maturity, a YTM of 9.4% and a current price of $945. The bonds make semiannual payments. What must the coupon rate be on the bond?

Thank you for any assistance you might provide :D
 
Re: Find Coupon Rate: bonds

Templegirl said:
Osbourne Corporation has bonds on the market with 10.5 years to maturity, a YTM of 9.4% and a current price of $945. The bonds make semiannual payments. What must the coupon rate be on the bond?
Start your own thread next time, TG; use "NewTopic" button.

Coupon amount = c; flow looks like (10.5 years = 21 semiannual periods):
[(now)945] ...(1)c...(2)c...(3)c..........................(20)c...(21)c+1000

Step 1: get PV of the 1000 due at end, subtract that from 945
Step 2: get value of c by equating the c flows to Step 1 result
Step 3: translate c into rate; example: if c=40, then coupon rate = 8% (40 / 1000 * 2 = .08)
 
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