Can't be solved directly; numeric method required
Works a bit like a loan:
You can tell that interest has to be lesser than 8%;Code:YR PAY'T INT BALANCE 0 105.35 1 -8.00 ? ? 2 -8.00 ? ? 3 -8.00 ? 100.00
6% will do it: try it!
Given the present value, coupon rate, face value, and term of a coupon bond, is there any easy way of finding the required rate of return without guessing or using a computer to find it for you?
Here is an example:
I am given that the present value of the bond is $105.35, the coupons are paid annually and are 8%, that the face value is $100.00 and that there are three years left to maturity (with the next payment being one year from now).
I get from this the equation
How do I find k?
Can't be solved directly; numeric method required
Works a bit like a loan:
You can tell that interest has to be lesser than 8%;Code:YR PAY'T INT BALANCE 0 105.35 1 -8.00 ? ? 2 -8.00 ? ? 3 -8.00 ? 100.00
6% will do it: try it!