The Hot Dog Shack wants to raise $1.2 million by selling some coupon bonds at par. Comparable bonds in the market have a 6.5 per
cent annual coupon, 15 years to maturity, and are selling at 97.687 percent of par. What coupon rate should The Hot Dog Shack set on its bonds?
1 answer:
Answer:
6.75%
Explanation:
In this question, we use the Rate formula which is shown in the spreadsheet.
The NPER represents the time period.
Given that,
This is correct Present value = $976.87
Assuming figure - Future value or Face value = $1,000
PMT = 1,000 × 6.5% = $65
NPER = 15 years
The formula is shown below:
= Rate(NPER,PMT,-PV,FV,type)
The present value come in negative
So, after solving this, the answer would be 6.75%
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