A corporation has a $1,000 par value bond outstanding that was issued for 30 years 5 years ago at a coupon rate of 15%. The yield on similar bonds is now 12%. What is the price and what is it yielding if it is selling for $938.81?
A $1000 bond with a coupon rate of 15% will pay $150 per year.
A 12% yield would require a calculation: $150 is ...
The solution explains how to mathematically calculate bond yields and provides information about the relationship between bond prices, bond yields and the coupon rate.