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The Reynolds Corporation issued $1,000 thirty-year bonds which pay $120 annually in interest. The bonds currently sell at par.

(a) What is the coupon rate?

(b) What is the current price of the bonds?

(c) What is the current yield?

(d) What is the yield to maturity?

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Solution Summary

This solution is comprised of detailed calculation of the following:

The Reynolds Corporation issued $1,000 thirty-year bonds which pay $120 annually in interest. The bonds currently sell at par.

(a) What is the coupon rate?

(b) What is the current price of the bonds?

(c) What is the current yield?

(d) What is the yield to maturity?

Solution Preview

(a) What is the coupon rate?

Using financial calculator:

Future Value (FV) = 1000, Annual Payment (PMT) = 120, N = 30

Coupon rate * par value = Annual payment
coupon rate (1000) = 120
coupon rate = 120 / 1000
Therefore, coupon ...

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