A firm is planning to issue two types of 20-year, noncallable bonds to raise a...
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A firm is planning to issue two types of 20-year, noncallable bonds to raise a total of $10 million, $5 million from each type of bond.First, 5,000 bonds with a 10% semiannual coupon will be sold at their $1,000 par value to raise $5,000,000. These are called par bonds.Second, Original Issue Discount bonds, also with a 20-year maturity and a $1,000 par value, will be sold, but these bonds will have a semiannual coupon of only 6.25%. The original issue discount bonds must be offered at below par in order to provide investors with the same effective yield as the par bonds.
How many Original issue discount bonds must the firm issue to raise $5,000,000
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