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What coupon rate should be set for the new bonds

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The Zara Company has an 8% coupon bond outstanding. The bond makes semiannual coupon payments and has 15 years remaining to maturity. Its market price is $877.78. It is issuing a new 20-year bond to finance a factory to make new Zaras. The new bond will make annual coupon payments.

What coupon rate should be set for the new bonds of for these new bonds to sell at par (i.e. for $1,000)?

Reference no: EM132459444

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