Question

Suppose your company needs to raise $68 million and you want to issue 20-year bonds for this purpose. Assume the required return on your bond issue will be 4.4 percent, and you’re evaluating two issue alternatives: A semiannual coupon bond with a coupon rate of 4.4 percent and a zero coupon bond. Your company’s tax rate is 24 percent. Both bonds will have a par value of $1,000. How many of the coupon bonds would you need to issue to raise the $68 million?

Answer 1

you would need 68000 of the coupon bonds to issue to raise the $68 million.

Step-by-step explanation:

price of the coupon bond = $1000

number of coupon bond = $68 million/1000

= 68000

Therefore, you would need 68000 of the coupon bonds to issue to raise the $68 million.