A deferred coupon bond of four year and single step-up note of five year, Both are selling at the equal price for an annual yield of 6.7% (BEY). The par value of both the bond and note is $100. The note semiannually pays at an annual coupon rate of 5.125% in the first 2 years and at an annual coupon rate of 5.425% in the last 3 years of its maturity. The bond has a deferred period of 1.5 years. After that it pays an annual coupon rate of C payable semiannually over the remaining maturity of the bond. What is C?

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solution Ans Deferred coupon bonds The deferred coupon bonds donot pay interest till a specific peri... View the full answer