Question

BDJ Co. wants to issue new 21-year bonds for some much-needed expansion projects. The company currently has 9.1 percent coupon bonds on the market that sell for $1,131, make semiannual payments, have a $1,000 par value, and mature in 21 years. What coupon rate should the company set on its new bonds if it wants them to sell at par? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Coupon rate

Answer 1

7.82%

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,

Present value = $1,131

Future value or Face value = $1,000

PMT = 1,000 × 9.1% ÷ 2 = $45.5

NPER = 21 years × 2 = 42 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 would be 7.82%