JRJ Corporation recently issued 10-year bonds at their par value, $1,000. These bonds pay $60 in interest each 6 months; their price has remained stable since they were issued, 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 6 months. If both bonds have the same yield, how many bonds must JRJ issue to raise $2,000,000 cash (ignore flotation costs)?
This solution looks at how many bonds need to be issued to raise a certain amount of cash.