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Barnes Enterprises has bonds on the market making annual payments, with 12 years to maturity, a par value of $1,000, and a price of $963. At this price, the bonds yield 6.14 percent. What must the coupon rate be on the bonds?

Respuesta :

Answer:

The coupon rate is 5.695%

Explanation:

In arriving at the coupon rate ,I calculated the coupon amount payable by the bond on yearly basis using the pmt formula in excel.

The formula is given as pmt(rate,nper,-pv,fv)

r is the rate of return on investment at 6.14%

nper is the number of years to maturity at 12 years

fv is future value of $1000

pv is the current price at $963

Find attached detailed calculation.

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