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lina2011 [118]
3 years ago
5

Mette Badminton Equipment Co. wants to raise $7 million to expand operations. To accomplish this, it plans to issue 20-year bond

s with a face value of $1,000. The coupon rate is set at 9% and the couponds will be paid semi-annually. The bonds are priced at a yield-to-maturity of 10%. What is the minimum number of bonds the firm must sell to raise the $7 million

Business
1 answer:
givi [52]3 years ago
7 0

Answer:

7,657 bonds

Explanation:

In order to determine the minimum number of bonds first we have to find out the present value of the bond which is to be shown in the attached spreadsheet.

Data provided in the question

Future value or Face value = $1,000

PMT = $1,000 × 9% ÷ 2 = $45

Rate of interest = 10% ÷ 2 = 5%

NPER = 20 years × 2 = 40 years

The formula is shown below:

= PV(Rate;NPER;PMT;FV;type)

So, after solving this, the present value of the bond is $914.20

Now the raise amount is $7 million

So, the number of minimum number of bonds is

= $7,000,000 ÷ $914.20

= 7,657 bonds

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