An issue of bonds, redeemable at par in n years, is to bear coupons at 9% com-

Question:

An issue of bonds, redeemable at par in n years, is to bear coupons at 9% com- pounded semi-annually. An investor offers to buy the entire issue at a premium of 15%. At the same time, the investor advises that if the rate were raised to 10% compounded semi-annually, he would offer to buy the whole issue at a premium of 25%. At what yield rate compounded semi-annually are these two offers equivalent?
Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a...