The face value of each bond is not given in the question, but we know that for every $1 of face value, $1.02 will be paid upon redemption. To find the face value, we can divide the amount of money needed to be raised ($100,000) by the redemption value ($1.02).
Face value = Amount needed / Redemption value
= $100,000 / $1.02
≈ $98,039.22
So, each bond has a face value of approximately $98,039.22. The rate of interest on the bond is given as 6.45% payable monthly. This means that the company will pay 6.45% of the face value as interest every month.
Monthly interest payment = Face value * Interest rate
= $98,039.22 * 0.0645
≈ $6,333.87
To find the amount of money the company will receive from the bond issue, we need to subtract the total interest payments from the face value of the bonds. Since the interest is payable monthly for 15 years, we multiply the monthly interest payment by the number of months in 15 years (15 * 12 = 180).
Total interest payments = Monthly interest payment * Number of months
= $6,333.87 * 180
≈ $1,140,096.60
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