AYE Technologies issued 10-year bonds yesterday at their par value of RM1,000. These bonds pay RM60 in interest every six months, and their price has remained at the RM1,000 issue price. AYE's CFO has determined that the firm needs an additional RM2,000,000, and has decided to issue 10- year, RM1,000 par value bonds that pay only RM40 in interest every six months. If both bonds are to provide investors with the same yield, how many new bonds must AYE issue to raise RM2,000,000? (Ignore the day or two difference between the bonds' issue dates and any bond flotation costs.)
AYE Technologies issued 10-year bonds yesterday at their par value of RM1,000. These bonds pay RM60 in interest every six months, and their price has remained at the RM1,000 issue price. AYE's CFO has determined that the firm needs an additional RM2,000,000, and has decided to issue 10- year, RM1,000 par value bonds that pay only RM40 in interest every six months. If both bonds are to provide investors with the same yield, how many new bonds must AYE issue to raise RM2,000,000? (Ignore the day or two difference between the bonds' issue dates and any bond flotation costs.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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AYE Technologies issued 10-year bonds yesterday at their par value of RM1,000. These bonds pay RM60 in interest every six months, and their price has remained at the RM1,000 issue price. AYE's CFO has determined that the firm needs an additional RM2,000,000, and has decided to issue 10- year, RM1,000 par value bonds that pay only RM40 in interest every six months. If both bonds are to provide investors with the same yield, how many new bonds must AYE issue to raise RM2,000,000? (Ignore the day or two difference between the bonds' issue dates and any bond flotation costs.)
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