Question
Hello my question is how did they receive 40 as PMT what order of operation was used to get 40$? This is the question: Suppose
Hello my question is how did they receive 40 as PMT what order of operation was used to get 40$?
This is the question:
Suppose a ten year bond with semiannual coupons has a price of $1,071.06 and a yield to
maturity of 7%. This bond's coupon rate is closest to:
How do they get 40 as payments
A) 3.5%
B) 6.0%
C) 7.0%
D) 8.0%
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Answer
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C ) 8.0 %
Semiannual rate = 7% / 2 = 3.5%
Nper = 10 years x 2 = 20
FV = $1,000
PV = $1,071.06
PMT =PMT(rate,nper,-pv,fv)
=PMT(3.5%,20,-1071.06,1000)
= $40.
Annual coupon payment = $40 x 2 = $80.
Coupon rate = (Annual coupon payment / Face value) x 100
= ($80 / $1,000) x 100
= 8.0%
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