Nikita Enterprises has bonds on the market making annual payments, with 17 years to maturity, a par value of $1,000, and selling for $956. At this price, the bonds yield 9.1 percent. What must the coupon rate be on the bonds?

Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.

To find the coupon rate on the bonds, we can use the **present value of a bond formula**:

\[
P = \frac{C \times (1 - (1 + r)^{-t})}{r} + \frac{F}{(1 + r)^t}
\]

Where:
- $ P $ is the price of the bond ($956),
- $ C $ is the annual coupon payment (what we're solving for),
- $ F $ is the face value or par value of the bond ($1,000),
- $ r $ is the yield to maturity (9.1% or 0.091),
- $ t $ is the time to maturity (17 years).

First, we isolate the coupon payment ($ C $):

\[
956 = \frac{C \times (1 - (1 + 0.091)^{-17})}{0.091} + \frac{1000}{(1 + 0.091)^{17}}
\]

Now we will calculate the second term and simplify.

Let's proceed with the calculations.The coupon rate on the bonds must be **8.58%** (rounded to two decimal places).

Would you like further details on the calculations or have any questions?

Here are five related questions to explore:

1. How does a bond's price change with respect to its coupon rate?
2. What is the relationship between the bond price and yield to maturity?
3. How do semi-annual coupon payments affect bond pricing?
4. What is the difference between current yield and yield to maturity?
5. How do you calculate the present value of bonds with different compounding frequencies?

**Tip**: The coupon rate reflects the annual interest payments as a percentage of the bond's face value, while the yield to maturity considers both interest and price changes.

Nikita Enterprises has bonds on the market making annual payments, with 17 years to maturity, a par value of $1,000, and selling for $956. At this price, the bonds yield 9.1 percent. What must the coupon rate be on the bonds?

Learn how to calculate the coupon rate for bonds issued by Nikita Enterprises. The bonds have 17 years to maturity, a par value of $1,000, and are currently selling for $956, with a yield to maturity of 9.1%. This detailed step-by-step solution covers the bond pricing formula and the relationship between price, yield, and coupon rate.

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