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Big Canyon Enterprises has bonds on the market making annual payments, with 12 years to maturity, a par value of $1,000, and a price of $1,030. At this price, the bonds yield 6.14 percent. What must the coupon rate be on the bonds? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Respuesta :

The coupon rate be on the bonds should be considered as the 6.50%.

Calculation of the coupon rate:

Coupon Rate = (Coupon Amount ÷ Face Value) × 100
Where Coupon amount can be calculated as

Price of bond = Coupon amount × PVIFA (n,i)+ Face value × PVIF (n,i)
Where n = time period, i = bonds yield

By putting the value, we get

$1,030 = Coupon amount × PVIFA (12 , 6.14%) + $1,000 × PVIF ( 12 ,6.14%)
By referring to PVIFA table

$1,030 = Coupon amount × 8.3199 + $1,000 × 0.4892
Coupon amount = ($1,030 - 489.2) ÷ 8.3199
= $65.00078126
By putting the value in the formula, we get

Coupon rate  = ($65.00078126 ÷ $1,000) × 100
= 6.50%

hence, The coupon rate be on the bonds should be considered as the 6.50%.

Learn more about coupon here: https://brainly.com/question/24349694

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