McConnell corporation has bonds on the market with 15 years to maturity, a YTM of 7.6 percent, a par value of $1,000, and a current price of $1,186.50. the bonds make semiannual payments. 5.75% must the coupon rate be on these bonds.
The yield to maturity is the same as the coupon rate if a bond is bought at par value. The yield to maturity of a bond is always greater than its coupon rate, even if the investor buys it at a discount.
By dividing the total annual coupon payments made on a bond by its par value, one may determine the bond's coupon rate.
A bond with a $1,000 face value that pays a $25 coupon twice a year, for instance, has a 5% coupon rate.
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