Question

Smiley Industrial Goods has bonds on the market making annual payments, with 13 years to maturity, and selling for $1,095. At this price, the bonds yield 6.4 percent. What must the coupon rate be on these bonds?

Answer 1

Answer: The coupon rate should be at 7.5%

Explanation: Couple payment is the payment receives annually by the bondholder on a bond from the day of its issuance till it reaches its maturity.

Couple rate = Sum of couple paid per year/ bond face value. Usually expressed in percentage.