Question: Please give a step-by-step solution, thanks. The answer is B. --------------------------------------------- Bavarian Sausage wants to issue a 10-year coupon bond. The face value of the

Please give a step-by-step solution, thanks.

The answer is B.

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Bavarian Sausage wants to issue a 10-year coupon bond. The face value of the bond is $1,000 and the bond makes SEMIANNUAL coupon payments. Outstanding Bavarian Sausage 8% bonds with a remaining maturity of 10 years are currently trading at $1,145. These bonds also have a face value of $1,000 and make SEMIANNUAL payments. If Bavarian Sausage wants the new bonds to sell at par, what should be the coupon rate on these bonds?

a.	8.00%
b.	6.05%
c.	7.25%
d.	9.35%

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