Freeman Cobblers recently issued 10-year bonds at a price of $1,000. These bonds pay $50 in interest each six months. Their price has remained stable since they were issued, that is, 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 $45 in interest every six months. If both bonds have the same yield, how many new bonds must Freeman issue to raise $3,000,000?

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The Answer of Freeman Cobblers recently issued 10-year bonds at a price of $1,000. These bonds pay $50 in interest each six months. Their price has remained stable since they were issued, that is, 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 $45 in interest every six months. If both bonds have the same yield, how many new bonds must Freeman issue to raise $3,000,000?

Freeman Cobblers Recently Issued 10-Year Bonds at a Price of $1,000