J

J

Company needs to raise $100,000,000 for an expansion project. The CFO is debating

whether to issue zero

-

coupon bonds or semi

-

annual coupon bonds. In either case the

bonds would have the same nominal required rate of return, a 30

-

year maturity and a

par

value of $1,000. If he issues the zero

-

coupon bonds, they would sell for $99.38. If he

issues the semi

-

annual coupon bonds, they would sell for $886.88. What coupon rate is

the Johnson Company planning to offer on the coupon bonds