On January 1, 2002, Zheng Corporation will issue new bonds to finance its expansion plans In its efforts to price the issue, Zheng Corporation has identified a company of similar risk with an outstanding bond issue that has an 8 percent coupon rate that is due January 1, 2017 This firm 's bonds cur...

On January 1, 2002, Zheng Corporation will issue new bonds to finance its expansion plans. In its

Question:

On January 1, 2002, Zheng will issue new bonds to finance its expansion plans. In its efforts to price the issue, Zheng has identified a company of similar risk with an outstanding bond issue that has an 8 percent rate that is due January 1, 2017. This firm's bonds currently are selling for $1,091.96. If interest is paid semiannually for both bonds, what must the rate of the new bonds be in order for the issue to sell at par.
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a...