Pandora Media plans to issue original issue discount (OID) bonds with a 20-year maturity, $1,000 par value, and initial yield to maturity of 8%. Since these bonds are issued below par, the total yield will come from both annual coupon payments and appreciation. If the bonds are offered at a discounted price of $820, what is their nominal coupon rate? That is, at this price, what coupon rate will result in a yield to maturity of 8%? Your answer should be between 5.12 and 8.74, rounded to 2 decimal places, with no special characters.
Pandora Media plans to issue original issue discount (OID) bonds with a 20-year maturity, $1,000 par value, and initial yield to maturity of 8%. Since these bonds are issued below par, the total yield will come from both annual coupon payments and appreciation. If the bonds are offered at a discounted price of $820, what is their nominal coupon rate? That is, at this price, what coupon rate will result in a yield to maturity of 8%? Your answer should be between 5.12 and 8.74, rounded to 2 decimal places, with no special characters.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Pandora Media plans to issue original issue discount (OID) bonds with a 20-year maturity, $1,000 par value,
and initial yield to maturity of 8%. Since these bonds are issued below par, the total yield will come from
both annual coupon payments and appreciation. If the bonds are offered at a discounted price of $820,
what is their nominal coupon rate? That is, at this price, what coupon rate will result in a yield to maturity of
8%?
Your answer should be between 5.12 and 8.74, rounded to 2 decimal places, with no special characters.
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