Chamberlain Co. wants to issue new 18-year bonds for some much-needed expansion projects. The company currently...

Chamberlain Co. wants to issue new 18-year bonds for some much-needed expansion projects. The company currently has 8.6 percent coupon bonds on the market that sell for $947.70, make semiannual payments, and mature in 18 years. What coupon rate should the company set on its new bonds if it wants them to sell at par? Assume a par value of $1,000.

Expert Solution

The coupon rate will be equal to the current YTM which is calculated using the RATE function:

=RATE(nper,pmt,pv,fv)

=RATE(18*2,8.6%/2*1000,-947.7,1000)*2

=9.20%

Where,

nper is number of periods to maturity,

pmt is payment per period,

pv is current price,

fv is redemption price of bond

jeff jeffy answered 2 years ago

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