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General Matter’s outstanding bond issue has a coupon rate of 10%, and it sells at a yield to maturity of 9.25%. The firm wishes to issue additional bonds to the public at face value ($1000). What coupon rate must the new bonds offer in order to sell at face value?

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amirmeeka

Answer:

Coupon Rate = 9.25%

To be able to sell its new bonds at face value, General Matter should offer a coupon rate equivalent to the yield to maturity its outstanding bonds provide to the investors.

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