Luther Industries needs to raise $25 million to fund a new office complex. The company plans on issuing ten-year bonds with a face value of $1,000 and a coupon rate of 7.3% (annual payments). The following table summarizes the YTM for similar ten-year corporate bonds of various credit ratings: Assuming that Luther's bonds receive a AAA rating, the number of bonds that Luther must issue to raise the needed $25 million is closest to ________.

Question

Luther Industries needs to raise $25 million to fund a new office complex. The company plans on issuing ten-year bonds with a face value of $1,000 and a coupon rate of 7.3% (annual payments). The following table summarizes the YTM for similar ten-year corporate bonds of various credit ratings:  Assuming that Luther's bonds receive a AAA rating, the number of bonds that Luther must issue to raise the needed $25 million is closest to ________.

Quizplus · Accepted Answer

C) FV = $1,000
PMT = $73.00
N = 10
I = 6.55
Compute PV = $1053.79.
Total number of bonds = $25,000,000 / $1053.79 = 23,723.89.

Luther Industries Needs to Raise $25 Million to Fund a New