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Coupon rate and required rate of return

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Coupon rate and required rate of return

  • This topic has 1 reply, 2 voices, and was last updated 4 years ago by John Moffat.
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  • June 20, 2020 at 11:50 am #574329
    utsavlt
    Participant
    • Topics: 31
    • Replies: 4
    • ☆

    $3,500,000 par value of outstanding bond that pays annually 10% coupon rate with an annual before-tax yield to maturity of 12%. The bond issue has face value of $1,000 and will mature in 20 years.

    Which is the coupon rate and investor required rate of return in this case ?

    June 20, 2020 at 5:51 pm #574355
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54674
    • ☆☆☆☆☆

    The question specifically says that the coupon rate is 10% !!!

    The before-tax yield to maturity is the investors required rate of return.

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