Question

If any steps can be performed on a financial calculator please show thank you!

Chamberlain Co. wants to issue new 13-year bonds for some much-needed expansion projects. The company currently has 10.6 percent coupon bonds on the market that sell for $1,226.22, make semiannual payments, and mature in 13 years. What coupon rate should the company set on its new bonds if it wants them to sell at par? Assume a par value of $1,000.

Answer 1

Calculating Yield to Maturity of Bond,

Using TVM Calculation,

I = [PV = -1,226.22, FV = 1,000, N = 26, PMT = 53]

I = 7.80%

For bond to sell at par value,

YTM = Coupon Rate

Coupon Rate = 7.80% semi-annually