Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. mcconnell corporation has bonds on the market with

McConnell Corporation has bonds on the market with 17 years to maturity, a YTM of 10.0...

Free

70.2K

Verified Solution

Question

Finance

McConnell Corporation has bonds on the market with 17 years tomaturity, a YTM of 10.0 percent, a par value of $1,000, and acurrent price of $1,196.50. The bonds make semiannual payments.What must the coupon rate be on these bonds? Multiple Choice 20.81%10.39% 24.90% 12.53% 12.43%

Answer & Explanation Solved by verified expert
4.5 Ratings (716 Votes)

Information provided:

Par value= future value= $1,000

Current price= present value= $1,196.50

Time= 17 years*2= 34 semi-annual periods

Yield to maturity= 10%/2= 5% per semi-annual period

Enter the below in a financial calculator to compute the amount of coupon payment:

FV= 1,000

PV= -1,196.50

N= 34

I/Y= 5

Press the CPT key and PMT to calculate the semi-annual coupon payment.

The value obtained is 62.1349.

The amount of annual coupon payment= $62.1349*2= $124.2699 $124.27

Coupon rate= Annual coupon payment/ Par value

                    = $124.27/ $1,000

                    = 0.1243*100

                    = 12.43%.

Hence, the answer is option e.

In case of any query, kindly comment on the solution.
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Zin AI - Your personal assistant for all your inquiries!
Become a Member

Transcribed Image Text

McConnell Corporation has bonds on the market with 17 years tomaturity, a YTM of 10.0 percent, a par value of $1,000, and acurrent price of $1,196.50. The bonds make semiannual payments.What must the coupon rate be on these bonds? Multiple Choice 20.81%10.39% 24.90% 12.53% 12.43%

Other questions asked by students

Q

The vapor pressure of liquid benzene is 17.7 kPa at 30 ºC and 37.7 kPa at...

Chemistry
Q

c) skeletal muscle contraction: explain the role of Ca2+ in the development of a twitch and...

Medical Sciences
Q

An electrochemical cell is based on the following two half-reactions: Ox: Sn(s)→Sn2+(aq, 1.65 M )+2e− Red: ClO2(g, 0.165...

Chemistry
Q

A long solenoid of radius 10cm is surrounding coaxially by a larger coil of radius...

Physics
Q

Q3 Sharon is remodeling the floor her studio apartment and needs to know how many...

Geometry
Q

For a certain horse race, the odds in favor of a certain horse finishing in...

Statistics
Q

Given sine 8 17 and cose 15 17 which of the following can be proven...

Calculus
Q

the company formed a subsidiary in germany and capitalized it with 900,000 euros whe the...

Accounting
Q

The standard cost of Wonder Walkers includes two units of direct materials at $8.00 per...

Accounting
Q

Exercise 11-6 On January 1, Concord Corporation had 62,700 shares of no-par common stock issued...

Accounting
Q

A financial statement auditor believes that the client has adequately disclosed a matter in its...

Accounting
Q

Bentloy Enterprises uses process costing to control costs in the manufacture of Dust Sensors for...

Accounting