How do I calculate the coupon rate of a bond?

Question

I am only given the years to maturity, bond price, and yield to maturity.

Answer 1

It isn't a simple thing. There is no way to calculate it directly -- but you can estimate the answer.

You could go to Excel and set up a set up a spread sheet. Take a guess at the coupon rate. Based on that, you can set up the cash flows and time until those flows. Find the present value of those flows & add them up. Compare it to the price. If the calcualted value is higher than the price, your guess is too high. If the calculated value is too low, your guess is too low. You could use Excel's Solver functin to find the right value.

Of course if it is a real bond, you can just look it up on Bloomberg & see what the coupon rate is.

Buz is wrong about needing the par value -- since bond prices are stated as a percent of par.

Answer 2

Bond Coupon Rate Calculator

Answer 3

Coupon Rate Formula

Answer 4

You'd also need the par value of the bond... assuming you have that, you can calculate the coupon yield as follows:

par value - amount paid = total discount
annual discount = total discount / years to maturity

the yield to maturity = (annual coupon interest + annual discount)/amount paid for bond

so if you have everything except the annual coupon interest, you can determine the annual coupon interest

then divide the annual coupon interest by the par value of the bond to get the coupon rate