BDJ Co. wants to issue new 20-year bonds for some much-needed expansion projects. The company currently has

Question:

BDJ Co. wants to issue new 20-year bonds for some much-needed expansion projects. The company currently has 8.5 percent coupon bonds on the market that sell for $1,125, 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?

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...