Seana Posts: 1, Reputation: 1 New Member #1 Jun 6, 2006, 11:09 AM
Coupon rate on a bond
:eek: I have to find the coupon rate on a bond but every formula I find requires the coupon rate to already be configured. How do I work backwards to get what I need?

Example problem - Samantha's bonds sell for \$1065.15. The bond life is 9 years and the yield to maturity is 7 percent. What must be the coupon rate on the bonds?

To look at it - it seems so simple. I don't understand why am having such trouble. Can anyone please help? Thanks.
 delite Posts: 202, Reputation: 3 Full Member #2 Aug 31, 2006, 08:37 AM
Try 6.07%
 Alex_Sierra Posts: 1, Reputation: 1 New Member #3 Mar 20, 2007, 07:07 PM
Originally Posted by Seana
:eek: I have to find the coupon rate on a bond but every formula I find requires the coupon rate to already be configured. How do I work backwards to get what I need?

Example problem - Samantha's bonds sell for \$1065.15. The bond life is 9 years and the yield to maturity is 7 percent. What must be the coupon rate on the bonds?

To look at it - it seems so simple. I don't understand why am having such trouble. Can anyone please help? Thanks.
It`s sounds easy,I hope this help you,The price of a bond in the very simple form is P=Fr*(an) + c*(v^n)
Where Fr=the product of the par value and the rate of the coupon and (an) is the annuity due and v^n it`s the discunt factor i.e v^n=1/(1+i)^n,n number of coupons or periods(term of the bond)
and c is the redemption value that is normal to be equal to the par value if is not especified. Then ( p-c*v^n)/(an)=r
remember that r will be the effective rate,to have the convertible for period just find the quotient r/k where k is the periodicity

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