Here is the question: Suppose a five-year, $1000 bond with annual coupons has a price of $900 and a yield to maturity of 6%. What is the bond’s coupon rate?What I did was use the present value of an annuity formula as so:
900=c[1-1/(1.065)^5 / .065
900= c(4.154)
c= 216.66
1000/216.66 = 4.6%
I have no clue if this is the right way to calculate, please help, thanks.
900=c[1-1/(1.065)^5 / .065
900= c(4.154)
c= 216.66
1000/216.66 = 4.6%
I have no clue if this is the right way to calculate, please help, thanks.