General Matter’s outstanding bond issue has a coupon rate of 9.6%, and it sells
ID: 2765468 • Letter: G
Question
General Matter’s outstanding bond issue has a coupon rate of 9.6%, and it sells at a yield to maturity of 8.00%. 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 9.6%, and it sells at a yield to maturity of 8.00%. 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
Answer:
In order to sell the bonds at face value, coupon rate must be equal to Yield to Maturity or market rate of return.
When coupon rate is equal to Yield To Maturity, bonds issue at face value.
Hence, coupon rate must be 8%..
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