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A coupon bond with a face value of ​$1400 that pays an annual coupon of ​$100 has a coupon rate equal to nothing​%. ​(Round your response to the nearest whole​ number) What is the approximate​ (closest whole​ number) yield to maturity on a coupon bond that matures one year from​ today, has a par value of ​$1000​, pays an annual coupon of ​$75​, and whose price today is ​$1004.50​?A. 6% B. 5% С. 7% D, 4% E, 8%

Answer :

Answer:

Coupon rate = 7.14 %

yield to maturity  = 7 %

correct answer is С. 7%

Explanation:

given data

face value = $1400

annual coupon = $100

par value of ​$1000

annual coupon = ​$75

today price =  $1004.50

solution

we get here first coupon rate that is

Coupon rate =  [tex]\frac{annual\ coupon}{face\ value}[/tex]    ...........1

Coupon rate = [tex]\frac{100}{1400}[/tex]

Coupon rate = 7.14 %

and

we get here yield to maturity that is  

yield to maturity = [ annual coupon + ( par value - today price ) ] ÷ today price  ...................2

put here value

yield to maturity = [tex]\frac{75 + (1000-1004.50)}{1004.50}[/tex]

yield to maturity =  0.070184 = 7 %

so correct answer is С. 7%

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