Question

Sunland Company is issuing eight-year bonds with a coupon rate of 6.5 percent and semiannual coupon payments. If the current market rate for similar bonds is 12 percent.

What will the bond price be? (Round intermediate calculations to 5 decimal places, e.g. 1.25145 and bond price to 2 decimal places, e.g. 15.25.)

Bond Price ?

If company management wants to raise $1.25 million, how many bonds does the firm have to sell? (Round intermediate calculations to 5 decimal places, e.g. 1.25145 and number of bonds to 0 decimal places, e.g. 5,275.)

Number of bonds ?

Answer 1

6 7 1,000 6.5% 32.50 10 A A Par value (FV) B Coupon rate c Number of compounding periods per year D = AxB/C Interest per period (PMT) E Number of years to maturity Number of compounding periods till F= CxE maturity (NPER) G Market rate of return/Required rate of Market rate of return/Required rate of G/c return per period (RATE) 8 11 12% 13 6% Bond price PV(RATE,NPER,PMT,FV)*-1 Bond price $ 722.09 =PV(6%,16,32.5,1000)*-1 Number of bonds 1,731 =1250000/722.09

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