General Matter’s outstanding bond issue has a coupon rate of 10.0%, and it sells at a yield to maturity of 8.25%. The firm wishes to issue additional bonds to the public at face value. What coupon rate must the new bonds offer in order to sell at face value

General Matter’s outstanding bond issue has a coupon rate of 10.0%, and it sells at a yield to maturity of 8.25%. The firm wishes to issue additional bonds to the public at face value. What coupon rate must the new bonds offer in order to sell at face value? (Enter your answer as a percent rounded to 2 decimal places.)

 

Explanation

When the bond is selling at face value, its yield to maturity equals its coupon rate. This firm's bonds are selling at a yield to maturity of 8.25%. So the coupon rate on the new bonds must be 8.25% if they are to sell at face value.