The Co needs $16 million to grow. They will sell 20yr, $1,000 face value bonds that...

The Co needs $16 million to grow. They will sell 20yr, $1,000 face value bonds that have 0% coupon. The expected YTM is 6 percent. How many bonds are needed to obtain the $16 million? Use annual compounding.
Hint: Solve for bond price, and use the price to solve for the number of bonds to equal the dollar amount needed.

1. 81,291

2. 25,657

3. 51,314

4. 40,646

5. 16,000

Thank you!!!

Expert Solution

A	Par value (FV)	$ 1,000
B	Coupon rate	0.00%
C	Number of compounding periods per year	1
D = A×B/C	Interest per period (PMT)	$ -
E	Number of years to maturity	20
F = C×E	Number of compounding periods till maturity (NPER)	20
G	Market rate of return/Required rate of return	6.00%
G/C	Market rate of return/Required rate of return per period (RATE)	6.00%
	Value of the bond	PV(RATE,NPER,PMT,FV)*-1

	Value of the bond	$ 311.80
		=PV(6%,20,0,1000)*-1

	Number of bonds to issue	51,314
		=16000000/311.8

jeff jeffy answered 1 year ago

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