Zheng Corporation plans to issue new bonds to finance its expansion plans.
In its efforts to price the issue, Zheng Corporation has identified a company of similar risk with an outstanding bond issue that has an 8 percent coupon rate having a maturity of ten years. This firm's bonds are currently selling for 1,091.96. If interest is paid annually for both bonds, what must the coupon rate of the new bonds be in order for the issue to sell at par?
A) 5.78
B) 6.88
C) 6.50
D) 6.71
Question 2
The common objective of borrowing and lending is to ________.
A) make all parties better off
B) gain a profit at the other's expense
C) make a firm or individual appear more liquid than is really the case
D) thwart regulatory authority
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