The Virginia Corporation recently issued 10-year bonds at a price of $1,000. These bonds pay $60 in interest each six months. Their price has remained stable since they were issued. i.e. they still sell for $1,000. Due to additional financing needs, the firm wishes to issue new bonds that would have a maturity of 10 years, a par value of $1,000 and pay $40 in interest every six months. If both bonds have the same yield, how many new bonds must the company issue to raise $2,000,000 cash?
The Virginia Corporation recently issued 10-year bonds at a price of $1,000. These bonds pay $60 in interest each six months. Their price has remained stable since they were issued. i.e. they still sell for $1,000. Due to additional financing needs, the firm wishes to issue new bonds that would have a maturity of 10 years, a par value of $1,000 and pay $40 in interest every six months. If both bonds have the same yield, how many new bonds must the company issue to raise $2,000,000 cash?
Chapter12: The Cost Of Capital
Section: Chapter Questions
Problem 2P
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The Virginia Corporation recently issued 10-year bonds at a price of $1,000. These bonds pay $60 in interest each six months. Their price has remained stable since they were issued. i.e. they still sell for $1,000. Due to additional financing needs, the firm wishes to issue new bonds that would have a maturity of 10 years, a par value of $1,000 and pay $40 in interest every six months. If both bonds have the same yield, how many new bonds must the company issue to raise $2,000,000 cash?
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