Question

Seether Co. wants to issue new 10-year bonds for some much-needed expansion projects. The company currently has 8.6 percent coupon bonds on the market that sell for $1,176.89, make semiannual payments, and mature in 10 years. What coupon rate should the company set on its new bonds if it wants them to sell at par?

3.10%

6.10%

6.50%

6.20%

5.90%

Answer 1

To find the ytm, we need to put the following values in the financial calculator:

INPUT	10x2=20		-1,176.89	(8.6%/2)x1,000=43	1,000
TVM	N	I/Y	PV	PMT	FV
OUTPUT		3.10

Annual YTM = 2 x r = 2 x 3.10% = 6.20%

Hence, Option "D" is correct.