This cannot be solved directly, so it's easiest to just use the calculator method to get an answer. You can then use the calculator answer as the rate in the formula just to verify that your answer is correct. Effective annual rate = [1 + (0.07774/2)]2 - 1 = 7.93 percent AACSB: Analytic Blooms: Analyze Difficulty: 2 Medium EOC: 7-18 Learning Objective: 07-02 Bond values and yields and why they fluctuate. Section: 7.1 Topic: Effective bond yield 121. Bonner Metals wants to issue new 18-year bonds for some much-needed expansion projects. The company currently has 11 percent bonds on the market that sell for $1,459.51, make semiannual payments, and mature in 18 years. What should the coupon rate be on the new bonds if the firm wants to sell them at par?
This cannot be solved directly, so it's easiest to just use the calculator method to get an answer. You can then use the calculator answer as the rate in the formula just to verify that your answer is correct. Effective annual rate = [1 + (0.07774/2)]2 - 1 = 7.93 percent AACSB: Analytic Blooms: Analyze Difficulty: 2 Medium EOC: 7-18 Learning Objective: 07-02 Bond values and yields and why they fluctuate. Section: 7.1 Topic: Effective bond yield 121. Bonner Metals wants to issue new 18-year bonds for some much-needed expansion projects. The company currently has 11 percent bonds on the market that sell for $1,459.51, make semiannual payments, and mature in 18 years. What should the coupon rate be on the new bonds if the firm wants to sell them at par?
Chap007.docx