Question 8 Current Yield 9 Points A 1000 facevalue coupon bo

Question #8: Current Yield [9 Points] A $1000 face-value coupon bond has a current yield of 5.75% and a market price of $1060. What is the bond’s coupon rate?

Solution

FV = $1000

Y= 5.75%

P= $1060

C or Coupon = ?

Assuming one year bond,

P = (FV + C)/ (1+y)

So,

120.95

So, coupon rate = 120.95/1000*100

= 12.1%