General Matter’s outstanding bond issue has a coupon rate of 8%, and it sells at
ID: 2765338 • Letter: G
Question
General Matter’s outstanding bond issue has a coupon rate of 8%, and it sells at a yield to maturity of 7.00%. The firm wishes to issue additional bonds to the public at face value. What coupon rate must the new bonds offer in order to sell at face value? (Round your answer to 2 decimal places.)
General Matter’s outstanding bond issue has a coupon rate of 8%, and it sells at a yield to maturity of 7.00%. The firm wishes to issue additional bonds to the public at face value. What coupon rate must the new bonds offer in order to sell at face value? (Round your answer to 2 decimal places.)
Explanation / Answer
Solution:
If the material rate (Yield to Maturity) is equals to Coupon Rate of Bond, Bonds issue at part or face value.
Hence Coupon Rate must be equal to Yield to Maturity (ie.7%) in order to sell at face value.
Answer is 7%.
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