Answer to Question #122212 in Macroeconomics for Joby George

Question

Consider a bond with face value of $1000 due to mature in one years time. Its current price is $1035 the current interest rate is 5.8%. its coupon is?

Answer 1

$Bond price={C\over(1+r)}+{P\over(1+r){^n}}$

C is coupon payment

P par value of the bond

r interest rate

n no of periods

$1,035={C\over(1+0.058)}+{1,000 \over(1+0.058){^1}}$

$C=95.22$