Q:

What is the way to calculate a coupon rate?

A:

Quick Answer

A coupon rate is calculated by using the formula c(1 + r)^-1 + c(1 + r)^-2 + ... + c(1 - r)^-y + B(1 + r)^-y = P. In this equation, the variable of c represents an annual coupon payment that is calculated in dollars, and not a percentage. The variable Y equals the number of years to maturity, the variable B stands for the par value and the variable of P represents the purchase price.

Know More

Full Answer

Coupon rate is the calculation of a yield that is paid by a fixed income security. The preceding equation in layman's terms fundamentally represents the division of the sum of the annual coupon payments of the security divided by the par value of the bond.

Other important terms that an investor should be familiar with while using this calculation include the current yield and yield to maturity. The current yield is an actual payment, and the annual payout of the current market price, noted as a percentage. The yield to maturity represents the rate of return from all of the payoffs, whether it be a gain or loss as well as the coupon and capital gain. Another way to describe the yield to maturity is to refer to it as the best prediction or measure of the return rate itself. All of these variables need exact calculation in order to correctly figure the amount of the coupon rate.

Learn more about Arithmetic

Related Questions

  • Q:

    How do you calculate the cost of goods purchased?

    A:

    The cost of goods purchased is calculated by subtracting the cost of goods sold from the cost of sales. Figuring out the cost of goods purchased is valuable for many businesses because it reflects whether or not a business has spent too much money on inventory. In addition, the cost of goods purchased is a useful tool for determining how much product needs to be sold to make a profit.

    Full Answer >
    Filed Under:
  • Q:

    How do you calculate mechanical advantage?

    A:

    Mechanical advantage is calculated differently depending on the type of simple machine being used. In general, mechanical advantage is a ratio of the force exerted by the machine to the force applied to the machine.

    Full Answer >
    Filed Under:
  • Q:

    What is the formula for percentages?

    A:

    The formula for finding percentages is to divide part of the whole quantity by the whole quantity and then multiply by 100 percent. A percentage change can be found by simply dividing the old quantity into the difference between the old quantity and the new quantity. This will produce some kind of decimal, integer or other kind of quotient value. To convert the value into a percentage, simply multiply it by 100.

    Full Answer >
    Filed Under:
  • Q:

    What is the formula to calculate average?

    A:

    To calculate the average of a group of numbers, first add the numbers together and then divide by the amount of numbers that are in the group. The formula for average is: sum/(quantity of numbers.)

    Full Answer >
    Filed Under:

Explore