A borrower comes to market with a 2% yield for a 10-year bond. The DV01 is 9 (0.0009). An investor comes in with a strong preference for a discount bond. The issuer finds that attractive. For technical reasons, the bond must have a price of at least 90%. So they agree to issue a bond at 90%. What would the coupon be? How did you calculate that? Explain the logic.

Answer rating: 100% (QA)

To calculate the coupon rate of the bond we can use the formula Coupon rate Yield Price 100 DV01 In ... View the full answer