ABC Corporation plans to issue new bonds to finance its expansion plans. In its efforts to price the issue, ABC Corporation has identified a company of similar risk with an outstanding bond issue that has an 8 percent coupon rate having a maturity of 10 years. This firm's bonds are currently selling for $1,091.96. If interest is paid annually for both bonds, what must the coupon rate of the new bonds be in order for the issue to sell at par

Respuesta :

Answer:

6.71%

Explanation:

Nper = 10

PMT = ($1000*8%) =  80

PV = -1,091.96

FV = 1000

Coupon rate for new bond issue = Rate(Nper, PMT, -PV, FV)

Coupon rate for new bond issue = Rate(10, 80, -1091.96, 1000)

Coupon rate for new bond issue = 0.067082953

Coupon rate for new bond issue = 6.71%