Problem:
BDJ Co. wants to issue new 25-year bonds for some much-needed expansion projects. The company currently has 7.8 percent coupon bonds on the market that sell for $1,125, make semiannual payments, and mature in 25 years.
Required:
Question 1: What coupon rate should the company set on its new bonds if it wants them to sell at par? Provide all calculation and methods.