Question

The Hot Dog Shack wants to raise $1.2 million by selling some coupon bonds at par. Comparable bonds in the market have a 6.5 percent annual coupon, 15 years to maturity, and are selling at 97.687 percent of par. What coupon rate should The Hot Dog Shack set on its bonds?

Answer 1

6.75%

Step-by-step explanation:

In this question, we use the Rate formula which is shown in the spreadsheet.

The NPER represents the time period.

Given that,

This is correct Present value = $976.87

Assuming figure - Future value or Face value = $1,000

PMT = 1,000 × 6.5% = $65

NPER = 15 years

The formula is shown below:

= Rate(NPER,PMT,-PV,FV,type)

The present value come in negative

So, after solving this, the answer would be 6.75%