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 MoreCoupon 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 ArithmeticTo calculate the area of a structure or section of land mass in square miles, use the formula for area of the section's shape with the dimensions, such as length, width, and radius, in miles. Not all sections of land or buildings have a simple shape, in which case the section should be divided up into simple shapes as well as possible to get an exact answer or a good estimate.
Full Answer >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 >The formula for the arithmetic mean of a group of numbers is A = S/N, where S represents the sum of all the numbers in the group, and N represents the total number of items in the group. Finding the arithmetic mean is essentially the same as taking the average.
Full Answer >The arithmetic sum formula is Sn = n/2 {2a + (n-1) d} where Sn is the sum of n-terms of an arithmetic progression, the first term is ‘a’ and the common difference between any two consecutive terms is given by d.
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