Answer to Question #12149 in Management for John

Question #12149
5. Cosmic Communications Inc. is planning two new issues of 25-year bonds. Bond Par will be sold
at its $1,000 par 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-year maturity and a $1,000 par value, but its
semiannual coupon will be only 6.25%. If both bonds are to provide investors with the same
effective yield, how many of the OID bonds must Cosmic issue to raise $3,000,000? Disregard
flotation costs, and round your final answer up to a whole number of bonds.
a. 4,228
b. 4,337
c. 4,448
d. 4,562
e. 4,676
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