Waterfront Properties wants to raise $3.5 million by selling some coupon bonds at par. Comparable bonds in the market have an 8 percent annual coupon, 10 years to maturity, and are selling at 101.7 percent of par. What coupon rate should Waterfront Properties set on its bonds?
a. 7.00 percent
b. 7.25 percent
c. 7.58 percent
D. 7.75 percent
e. 8.00 percent
Answer: The correct answer is 7.75 percent.
Enter 10 -1,017 80 1,000
N I/Y PV PMT FV
Solve for 7.75
Since the current market yield on comparable bonds is 7.75%, Waterfront Properties
should set its coupon rate at 7.75% if it wants its bonds to sell at par.