Thread: How to find the required rate of return for a coupon bond?

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:

Code:

YR  PAY'T      INT      BALANCE
0                        105.35
1   -8.00       ?          ?
2   -8.00       ?          ?
3   -8.00       ?        100.00

You can tell that interest has to be lesser than 8%;
6% will do it: try it!