Barnes enterprises has bonds on the market making annual payments, with 14 years to maturity, a par value of $1,000, and a price of $967. at this price, the bonds yield 7.9 percent. what must the coupon rate be on the bonds?

The coupon rate on the bonds is 7.50%.

The current price of a bond is nothing but the discounted value of the coupon payments and the face value at the yield or YTM.

Hence, mathematically the bond's price is given by the formula:

where,

CMP = Current Market Price of the bond

C    = Coupon in dollars

r      = YTM

n     = number of years to maturity

FV = Face Value

Substituting the values in the equation above we get,

Solving further we get,

\mathbf{C = 75.02042315}

Since the dollar value of coupons is $75.02042315, we can calculate the coupon rate on the bonds as:

c

explanation:

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