Chamberlain Company wants to issue new 18-year bonds for some much-needed expansion projects. The company currently has 9.8 percent coupon bonds on the market that sell for $865.21, make semiannual payments, and mature in 18 years. What coupon rate should the company set on its new bonds if it wants them to sell at par? Assume a par value of $1,000.

Chamberlain Company wants to issue new 18-year bonds for some much-needed expansion projects. The company currently has 9.8 percent coupon bonds on the market that sell for $865.21, make semiannual payments, and mature in 18 years. What coupon rate should the company set on its new bonds if it wants them to sell at par? Assume a par value of $1,000.

College Accounting, Chapters 1-27

23rd Edition

ISBN:9781337794756

Author:HEINTZ, James A.

Publisher:HEINTZ, James A.

Chapter22: Corporations: Bonds

Section: Chapter Questions

Problem 1CE

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Question

5
2
Chamberlain Company wants to issue new 18-year bonds for some much-needed
expansion projects. The company currently has 9.8 percent coupon bonds on the
market that sell for $865.21, make semiannual payments, and mature in 18 years. What
coupon rate should the company set on its new bonds if it wants them to sell at par?
Assume a par value of $1,000.

Expert Solution

Step 1

Given,

Par value of bond is $1000

Term is 18 years

Coupon rate is 9.8%

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