BDJ Co. wants to issue new 18-year bonds for some much-needed expansion projects. The company currently has 9.9 percent coupon b
onds on the market that sell for $1,139, make semiannual payments, have a par value of $1,000, and mature in 18 years.
Required:
What coupon rate should the company set on its new bonds if it wants them to sell at par? (Do not include the percent sign (%). Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
Required:
What coupon rate should the company set on its new bonds if it wants them to sell at par? (Do not include the percent sign (%). Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
1 answer:
Answer:
8.38%
Explanation:
We use the RATE formula in this question which is presented on the attachment below:
Given that,
Present value = $1,139
Future value or Face value = $1,000
PMT = 1,000 × 9.9% ÷ 2 = $49.50
NPER = 18 years × 2 = 36 years
The formula is shown below:
= Rate(NPER;PMT;-PV;FV;type)
The present value come in negative
So, after solving this, the coupon rate is
= 4.19% × 2
= 8.38%
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