Marshall Company is issuing eight-year bonds with a coupon rate of 7.62 percent

Question

Marshall Company is issuing eight-year bonds with a coupon rate of 7.62 percent and semiannual coupon payments. If the current market rate for similar bonds is 8.48 percent.

What will be the bond price? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and bond price to 2 decimal places, e.g. 15.25.)

If the company wants to raise $1.25 million, how many bonds does the firm have to sell? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and number of bonds to 0 decimal places, e.g. 5,275.)

Explanation / Answer

bond price = 32.50*PVIFA(8.48%,8) + 1000/(1+.0848)^8 = 32.50*5.6434 +1000/(1+.0848)^8 = 704.84

no of shares = 1250000/704.84=1773.45

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