K Your company currently has $1,000 par, 5.75% coupon bonds with 10 years to maturity and a price of $1,085. 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. To determine the coupon rate that must be set, use the following formula and solve for y, the yield 1 FV (1- (1+y) (1+y)" where P is the price, CPN is the coupon payment, FV is the face value, and n is the number of periods Therefore, P= CPN y - * + $1,085 = $28.75 1 (1+y)20 and through trial and error, we can determine that y=0.0234 (-1 X y $1,000 (1+y)20 + X upon

where does the 28.75 come from ?

Your company currently has $1,000 par, 575% coupon bonds with 10 years to maturity and a price of $1,0a5 if you wart 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 paymont is due in exactly sax months To determine the coupon rato that must be set, use the followng formula and solve for y, the yeld P=yCPN(1(1+y)n1)+(1+y)nFV Where P is the price, CPN is the coupon parment, IV is the face value, and a is the number of periods Theretoes 51,085=y52875(1(1+y201)+(1+y20$1,000 and through triat and erros, wo can determine that y=0.0234