Your company currently has par, coupon bonds with 10 years to maturity and a price of. If you want to issue new 10-year coupon bonds at par, what coupon rate do you need to set? assume that for both bonds, the next coupon payment is due in exactly six months.

A bond is a sort of financial asset in which the issuer (the debtor) owes the holder (the creditor) a debt and is obligated to repay the principal (i.e. amount borrowed) of the bond at the maturity date as well as interest (called the coupon) over a specified period of time, depending on the terms.

To find the coupon rate in order to sell the new bonds at par:

The company now possesses $1,000 par, 6.5 percent coupon bonds with a maturity date of 10 years and a price of $1,078.
If we intend to issue fresh 10-year coupon bonds at par, assume that the next coupon payment is due in exactly six months for both bonds.
We must compute the current bonds' yield to maturity (YTM).
Because the bonds pay interest every six months, the coupon is $32.50.

YTM = {coupon + [(face value - market value)/n]}/[(face value + market value)/2]
YTM = {32.5 + [(1,000 - 1,078)/20]}/[(1,000 + 1,078)/2]
YTM = 28.6 / 1,039 = 0.275 x 2 = 5.5053% ≈ 5.51%

Therefore, in order to sell the new bonds at par, the coupon rate must be 5.51%.

Know more about bonds here:

https://brainly.com/question/25965295

#SPJ4