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Luther Industries needs to raise $25 million to fund a new office complex. The company plans on issuing 10-year bonds with a face value of $1 000 and a coupon rate of 7.0% (annual payments). The following table summarises the YTM for similar 10-year corporate bonds of various credit ratings:

-Assuming that Luther's bonds receive a BBB rating, the number of bonds that Luther must issue to raise the needed $25 million is closest to:

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Luther Industries needs to raise $25 million to fund a new office complex. The company plans on issuing 10-year bonds with a face value of $1 000 and a coupon rate of 7.0% (annual payments). The following table summarises the YTM for similar 10-year corporate bonds of various credit ratings:
 
-Assuming that Luther's bonds receive a BBB rating, the number of bonds that Luther must issue to raise the needed $25 million is closest to:

Quizplus · Accepted Answer

The number of bonds needed is calculated by dividing the total amount to be raised ($25 million) by the price per bond. Assuming a BBB rating, the price per bond would be slightly below par due to the higher risk, leading to the need for more bonds to reach the target amount.

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