Question

Whipple Corporation just issued 245,000 bonds with a coupon rate of 5.81 percent paid semiannually that mature in 30 years. The bonds have a yield to maturity (YTM) of 6.25 percent and have a par value of $2,000. How much money was raised from the sale of the bonds?

a) $245,000,000
b) $490,000,000
c) $600,625,000
d) $737,500,000

Answer 1

Whipple Corporation raised $490,000,000 from the sale of 245,000 bonds at a par value of $2,000 each. The coupon rate and yield to maturity do not affect the initial proceeds from the bond sale.

Step-by-step explanation:

The student asked how much money Whipple Corporation raised from the sale of 245,000 bonds with a par value of $2,000 each.

To determine the total amount raised, we simply multiply the number of bonds by the par value, taking into account the coupon rate and yield to maturity (YTM) is not necessary for calculating the total amount raised through bond sales. Since the bond sale is at par, the coupon rate being different from the YTM doesn't affect the initial sale proceeds.

The calculation would be 245,000 bonds multiplied by the par value of $2,000, which equals $490,000,000. Therefore, the correct answer to how much money was raised from the sale of the bonds is option (b) $490,000,000.