Giles Co.: Coupon Rate on Bonds
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Giles Co. wants to issue new 20-year bonds for some much-needed expansion projects. The company currently has 7% coupon bonds on the market that sell for $1,062, make semiannual payments, and mature in 20 years. What coupon rate should the company set on its new bonds if it wants them to sell at par?
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The coupon rate should be the YTM on the existing bonds. If the coupon rate is the same as YTM, then the bonds sell at par. We need to calculate the YTM on the existing bonds. ...
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