Use the information for the question(s)below.
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 $1000 and a coupon rate of 7.0% (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:
A)24,655
B)25,000
C)24,477
D)26,681
E)25,114

Question

Use the information for the question(s)below.
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 $1000 and a coupon rate of 7.0% (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:
A)24,655 
B)25,000 
C)24,477 
D)26,681 
E)25,114

Quizplus · Accepted Answer

Luther's bonds receive a AA rating, so the yield to maturity is 6%. The number of bonds that Luther must issue to raise the needed $25 million is:$25,000,000 / $1,015.12 = 24,655.

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