Q 17 Your company currently has $1,000 par, 6.75% coupon bonds with 10 years to maturity...
Q 17 Your company currently has $1,000 par, 6.75% coupon bonds with 10 years to maturity and a price of $1,069. 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 %
Homework Answers
The coupon rate needed to be set is the current bond Yield to maturity:
=RATE(periods,pmt,pv,fv)
=RATE(10*2,6.75%/2*1000,-1069,1000)
=2.91%
This is the semi-annual rate, annual rate or APR is 2.91%*2 = 5.83%
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