I can do the simpler version of these, but I think the semi-annual part is tripp

Question

I can do the simpler version of these, but I think the semi-annual part is tripping me up.. Do I change the 1/Y or the n value to accommodate this? I saw as similar problem but it didn't help.
Please show financial calculator functions. Thanks!


BDJ Co. wants to issue new 20-year bonds for some much-needed expansion projects. The company currently has 8.5 percent coupon bonds on the market that sell for $1,125, make semiannual payments, and mature in 20 years.

Required:
What coupon rate should the company set on its new bonds if it wants them to sell at par?

Explanation / Answer

n = 20 * 2 = 40
i/Y = 8.5 / 2 = 4.25
PV = 1,125
FV = 0

compute, PMT = -58.97

Coupon payment = 58.97

Coupon rate = Annual coupon payment / Par value = (58.97 * 2) / 1125 = 10.5%

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.