25 pts D Question 34 Bonner Metals wants to issue new 20year

2.5 pts D Question 34 Bonner Metals wants to issue new 20-year bonds for some much-needed expansion projects. The company currently has 85 percent bonds on the market that sell for $995, make semiannual payments, and mature in 16 rs. What should the coupon rate be on the new bonds if the frm wants to sell them at par? D 8.99 percent D 8.76 percent O 9.32 percent O 8.75 percent O 8.56 percent D |Question 35 2.5 pts A bond has a coupon rate of 8 percent, 7 years to maturity, semiannual interest payments, and a YTM of 7 percent.

Solution

to sell the bonds at par, the coupon rate should equal the yield on the existing bonds

FV = 1000, N = 32, PMT = 42.50, PV = -995

use rate function in Excel and multiply by 2

yield or new coupon rate = 8.56 percent