Question

ABC Ltd is planning to issue 16-year semi-annual coupon bonds with a face value of $1,000 and a coupon rate of 6.5%. The nominal yield to maturity of potential investors is estimated to be 7.6% per annum. Calculate the required number (expressed as an integer) of semi-annual coupon bonds to be issued if the firm aims to raise $15 million. (3 marks)

Answer 1

А. B 1 2 Amount to be raised $15,000,000.00 3 YTM 7.60% 4 Coupon rate 6.50% 5 Years 16 6 Face value $ 1,000.00 7 Frequency 2 8 9 Price of a bond 10 No of bond to sell $899.14 16,683

Calculation:-

A B 1 2 Amount to be raised 15000000 3 YTM 0.076 4 Coupon rate 0.065 5 Years 16 6 Face value 1000 7 Frequency 2 8 9 Price of a bond =PV(B3/B7,B5*B7,-B4/B7*B6,-B6) 10 No of bond to sell =B2/B9