Question

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 percent 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?

Answer 1

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%