JRJ 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 JRJ issue to raise $2,000,000 cash?© BrainMass Inc. brainmass.com June 3, 2020, 7:51 pm ad1c9bdddf
The yield on 10 year bonds = 6% as the bonds with 6% coupon are selling at ...
This solution has step-by-step calculations to determine the price of the new bond and number of bonds issued by using the variables of PV of par value repayment and PV of interest payments.