Final answer:
A business issuing 200 bonds with a $1,000 face value each at an 8% face rate, when the market interest rate is also 8%, will receive $200,000 in cash. Because the market rate matches the coupon rate, each bond will sell at face value, avoiding any premium or discount.
Step-by-step explanation:
To determine how much cash a business will receive from issuing bonds, we consider the scenario provided: the business issues 200 bonds with a $1,000 face value each, having an 8% face rate (also known as the coupon rate), and the market rate of interest is also at 8%. Since the coupon rate matches the market interest rate and there is no additional risk noted, it's safe to assume that each bond will sell at its face value. Thus, the total cash inflow from this bond issue will be 200 bonds multiplied by $1,000, which equals $200,000. This computation is straightforward given that there are no premiums or discounts due to the matching interest rates.
The face rate and the market rate of interest staying equal is essential since if the market rate were higher or lower than the coupon rate, the bonds would sell at a discount or premium, respectively. However, that is not the case here, so the business will indeed receive the full-face value of the bonds issued, amounting to substantial cash for the business's funding requirements.