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 5.6% (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 AA 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 5.6% (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 AA rating, the number of bonds that Luther must issue to raise the needed $25 million is closest to ________.

Quizplus · Accepted Answer

A) FV = $1,000
PMT = $56.00
N = 10
I = 7.06%
Compute PV
Total number of bonds = $25,000,000 / $897.74 = 27,848

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