Question

Setrakian Industries needs to raise $48.5 million to fund a new project. The company will sell bonds that have a coupon rate of 5.56 percent paid semiannually and that mature in 10 years. The bonds will be sold at an initial YTM of 6.13 percent and have a par value of $2,000. How many bonds must be sold to raise the necessary funds? (Round your intermediate calculations to two decimal places and final answer to the nearest whole number.)

Answer 1

Value of BOnd = PV of cash flows from it.

Period	CF	PVF @3.065%	Disc CF
1	$      55.60	0.9703	$      53.95
2	$      55.60	0.9414	$      52.34
3	$      55.60	0.9134	$      50.79
4	$      55.60	0.8862	$      49.28
5	$      55.60	0.8599	$      47.81
6	$      55.60	0.8343	$      46.39
7	$      55.60	0.8095	$      45.01
8	$      55.60	0.7854	$      43.67
9	$      55.60	0.7621	$      42.37
10	$      55.60	0.7394	$      41.11
11	$      55.60	0.7174	$      39.89
12	$      55.60	0.6961	$      38.70
13	$      55.60	0.6754	$      37.55
14	$      55.60	0.6553	$      36.43
15	$      55.60	0.6358	$      35.35
16	$      55.60	0.6169	$      34.30
17	$      55.60	0.5986	$      33.28
18	$      55.60	0.5808	$      32.29
19	$      55.60	0.5635	$      31.33
20	$      55.60	0.5467	$      30.40
20	$ 2,000.00	0.5467	$ 1,093.47
Price of Bond			$ 1,915.71

No. of bonds = Amount Required / Value of Bond

= $ 48,500,000 / 1915.71

= 25,317.04 i.e 25317 bonds