Bavarian Sausage wants to issue a 10-year coupon bond.The face value of the bond is $1,000 and the bond makes SEMIANNUAL coupon payments.Outstanding Bavarian Sausage 8% bonds with a remaining maturity of 10 years are currently trading at $1,145.These bonds also have a face value of $1,000 and make SEMIANNUAL payments.If Bavarian Sausage wants the new bonds to sell at par,what should be the coupon rate on these bonds?

Question

Quizplus · Accepted Answer

FV: 1000
PV: 1145
PMT: 80/2
N: 10/2
I/Y: 3.025
coupon rate = 3.025*2 = 6.05

Bavarian Sausage Wants to Issue a 10-Year Coupon Bond