Thank you for visiting Consider the following three bond quotes 1 A treasury bond quoted at 105 4688 2 A corporate bond quoted at 96 20 3 A municipal. This page is designed to guide you through key points and clear explanations related to the topic at hand. We aim to make your learning experience smooth, insightful, and informative. Dive in and discover the answers you're looking for!
Answer :
The price of the three bonds in dollars is Treasury bond $1054.69, Corporate bond $962, and Municipal bond $5030. The bond prices are obtained by multiplying the bond quote by the par value. The bond quotes are already in decimals. The corporate and Treasury bonds have a par value of $1000, while the municipal bond has a par value of $5000.
Therefore, the price of the Treasury bond = 105.4688 × $1000 = $1054.69, the price of the Corporate bond = 96.20 × $1000 = $962, and the price of the Municipal bond = 100.60 × $5000 = $5030. Therefore, the price of these three bonds in dollars are Treasury bond $1054.69, Corporate bond $962, and Municipal bond $5030. To find the coupon rate, we use the formula for current yield:
Current Yield = Coupon Payment / Bond Price × 100
Since we know the bond price and current yield, we can calculate the coupon payment. The bond's current yield is 6.39%. Therefore,
Current Yield = 6.39% = Coupon Payment / 97.8 × 100
Coupon Payment = (6.39/100) × 97.8 = $6.24
Coupon payment is $6.24.
Therefore, the coupon rate isCoupon Rate = Coupon Payment / Par Value × 100= $6.24 / $100 × 100= 6.24%Thus, the coupon rate is 6.24%.
Learn more about coupon payment: https://brainly.com/question/17151706
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