6.Rochdale Group has some 8% coupon bonds on the market that are selling at $974.69, pay interest semi-annually, and mature in fifteen years. Rochdale would like to issue $1 million in new fifteen-year bonds. What coupon rate should be applied to the new bonds if Rochdale wants to sell them at par?

A)4.15%

B)8.00%

C)8.30%

D)8.50%

E)9.75%

Solution:C

FV1,000

PMT40

PV-974.69

N30

CPTI/Y = 4.149

Coupon rate = YTM = 4.149 x 2 = 8.30%

Can you explain why the PV is 974.69 instead of 1000? Because it says selling it at par value (1000).