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Coupon rate of the new issue

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Reference no: EM133119893

HYDRO ONE INC wishes to issue a new series of bonds on the market to finance a major expansion project. The maturity would be 20 years and to establish a competitive coupon rate, we want to offer a yield 20% higher than the yield of the last series of bonds issued. This latter series has a face value of $1,000 and a coupon rate of 6% (paid semi-annually). It was issued on January 5, 2015 with a 30-year maturity on January 5, 2045. The bond is selling as of today, February 15, 2022, at $1,086. What should be the coupon rate (paid semi-annually) of the new issue assuming that the bond can be bought on its date of issue at a discount, ie at the index 98.5? Please present all your calculations

Reference no: EM133119893

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