Answer to Question #1383 in Finance for Anne

Question #1383

Company 1 is planning two new issues of 25-yr bonds. Bond Par will be sold at its $1000 per value, and it will have a 10% semiannual coupon. Bond OID will be an original issue discount bond and it will also have a 25-yr maturity and a $1000 par value, but its semiannual coupon will be 6.25%. If both bonds are to provide investors with the same effective yield, how many of the IOD bonds must the company issue to raise $3,000,000? Disregard floatation costs.

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