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BDJ Co. wants to issue new 18-year bonds for some much-needed expansion projects. The company currently has 9.9 percent coupon bonds on the market that sell for $1,139, make semiannual payments, have a par value of $1,000, and mature in 18 years.


Required:


What coupon rate should the company set on its new bonds if it wants them to sell at par? (Do not include the percent sign (%). Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Respuesta :

Answer:

8.38%

Explanation:

We use the RATE formula in this question which is presented on the attachment below:

Given that,  

Present value = $1,139

Future value or Face value = $1,000  

PMT = 1,000 × 9.9% ÷ 2 = $49.50

NPER = 18 years × 2 = 36 years

The formula is shown below:  

= Rate(NPER;PMT;-PV;FV;type)  

The present value come in negative  

So, after solving this, the coupon rate is

= 4.19% × 2

= 8.38%

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