Question

Your company currently has $ 1,000 ​par, 5.75 % coupon bonds with 10 years to maturity...

Your company currently has $ 1,000 ​par, 5.75 % coupon bonds with 10 years to maturity and a price of $ 1,089.

If you want to issue new​ 10-year coupon bonds at​ par, what coupon rate do you need to​ set? Assume that for both​ bonds, the next coupon payment is due in exactly six months.

You need to set a coupon rate of ..........​%. ​(Round to two decimal​ places.)

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Answer #1

The coupon rate to set is calculated using the RATE function:-

=RATE(nper,pmt,pv,fv)

=RATE(10*2,5.75%/2*1000,-1089,1000)*2

=4.63%

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