Coccia Co. wants to issue new 16-year bonds for some much-needed expansion proje

Question

Coccia Co. wants to issue new 16-year bonds for some much-needed expansion projects. The company currently has 10 percent coupon bonds on the market that sell for $1,075, make semiannual payments, and mature in 16 years.

What coupon rate should the company set on its new bonds if it wants them to sell at par? (Round your answer to 2 decimal places. (e.g., 32.16))

Coccia Co. wants to issue new 16-year bonds for some much-needed expansion projects. The company currently has 10 percent coupon bonds on the market that sell for $1,075, make semiannual payments, and mature in 16 years.

Explanation / Answer

If you are using TI BA 2 Plus, here are the keystrokes:

N=32;

I/Y=unknown;

PV= -1,075;

PMT 100/2=50 --calculating the payment is the face value of the bond 1,000 x

0.10 = 100/2.

FV (fave value of bond)1,000;

CPT I/Y4.55 x 2=9.10--the coupon rate is multiplied by 2 because the payments are made semiannually(twice).

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