A Johnson corporation bond is currently selling for $850.The bond matures in 20 years,has a face value of $1,000,and a yield to maturity of 14.30%.The bond's coupon rate is

Question

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Since the bond is currently selling for $850, which is less than its face value of $1,000, it is selling at a discount. The yield to maturity of 14.30% indicates the effective rate of return on the bond if held until maturity. Using the present value formula, we can solve for the coupon rate that would make the bond's current price equal to $850:
$850 = ($1000 / (1 + 0.143)^20) + (C / 0.143) x (1 - 1 / (1 + 0.143)^20)
where C is the annual coupon payment. Solving for C, we get a coupon rate of 12%. Therefore, the best choice is C) 12%.

A Johnson Corporation Bond Is Currently Selling for $850