17. BH Corp. has bonds on the market with $1,000 par value, 14.5 years to maturity, a YTM
of 9%, and a current price of $850. The bonds make semi-annual coupon payments.
What is the coupon rate on BH Corp. Bonds?
A) 3.56%
B) 4.50%
C) 5.50%
D) 7.13%
E) 9.00%
Answer D
P = $850 = C x PVIFA(4.5%,29) + $1,000/ (1+4.5%)
29
Solving for C = $35.64; or coupon rate = 2 × 3.564% = 7.128%.
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