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BBT Inc. needs to raise funds for a project. The company can choose to issue either...

BBT Inc. needs to raise funds for a project. The company can choose to issue either zero-coupon bonds or semi-annual coupon bonds. In either case the bonds would have the same YTM, a 20-year maturity and a par value of $1,000. If the company issues the zero-coupon bonds, they would sell for $153.81. If it issues the semi-annual coupon bonds, they would sell for $756.32. What annual coupon rate is the company planning to offer on the coupon bonds? (rounded to 6 decimal places; assume semi-annual compounding for ZCB)

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Answer #1

Calc:

Where,
nper is periods to maturity,

pmt is payment per period,

pv is current price

fv is redemption price of bond

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