The Chief Financial Officer of a company would like to raise money for new equipment by floating a new bond issue. The CFO would like to receive $1000 (full face value) for each of the bonds she sells. After collecting the below bond market data, and if the bonds carry a rating of A and have a term of 10 years, what coupon rate should be included in the bond contract? Assume an annual coupon payment.

Security & Rating Maturity Face Coupon Price

Treasury 1 $ 1,000 0.00% $ 965.00

Treasury 3 $ 1,000 1.90% $ 939.06

Treasury 5 $ 1,000 4.30% $ 932.42

Treasury 10 $ 1,000 6.80% $ 1,007.12

Treasury 15 $ 1,000 6.60% $ 908.25

CorpA A 5 $ 1,000 8.10% $ 990.00

CorpB BB 10 $ 1,000 7.90% $ 859.88

CorpC AA 15 $ 1,000 7.00% $ 660.00

Multiple Choice

• 8.35%

• 6.70%

• 2.45%

• none of the above

• 9.15%