What is the coupon rate for a bond with 3 years until maturity,a price of $1,053.46,and a yield to maturity of 6%?

Question

Quizplus · Accepted Answer

To find the coupon rate of the bond, we need to use the following formula:
Coupon Rate = Annual Coupon Payment / Bond Face Value
We do not have the annual coupon payment or the bond face value, but we can use the price and the yield to maturity to calculate them.

Using a financial calculator, we can find that the bond face value is $1,000.
N = 3, PV = -1,053.46, FV = 1,000, PMT = ?, I/Y = 6
Solving for PMT, we get an annual coupon payment of $80.

Plugging in these values into the formula, we can find the coupon rate:
Coupon Rate = 80 / 1,000
Coupon Rate = 0.08 or 8%

Therefore, the correct answer is B.

What Is the Coupon Rate for a Bond with 3