Hard Spun Industries (HSI) has a project that it expects will produce a cash flow of $3.7 million in 13 years. To finance the project, the company needs to borrow $2.5 million today. The project will also produce intermediate cash flows of $250,000 per year that HSI can use to service coupon payments of $125,000 every six months. Based on the risk of this investment, market participants will require a 9.5% yield. If HSI wishes a maturity of 13 years matching the arrival of the lump sum cash flow), what does the face value of the bond have to be? Recall that the compounding interval is 6 months and the YTM, like all interest rates, is reported on an annualized basis. (Enter ust the number in dollars without the $ sign or a comma and round off decimals to the closest integer, i.e., rounding $30.49 down to $30 and rounding $30.50 up to $31.) Enter answer here

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
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9. Hard Spun Industries (HSI) has a project that it expects will produce a cash flow of $3.7 million in 13 years. To
finance the project, the company needs to borrow $2.5 million today. The project will also produce intermediate
cash flows of $250,000 per year that HSI can use to service coupon payments of $125,000 every six months. Based
on the risk of this investment, market participants will require a 9.5% yield. If HSI wishes a maturity of 13 years
(matching the arrival of the lump sum cash flow), what does the face value of the bond have to be? Recall that the
compounding interval is 6 months and the YTM, like all interest rates, is reported on an annualized basis. (Enter
just the number in dollars without the $ sign or a comma and round off decimals to the closest integer, i.e.,
rounding $30.49 down to $30 and rounding $30.50 up to $31.)
Enter answer here
Transcribed Image Text:9. Hard Spun Industries (HSI) has a project that it expects will produce a cash flow of $3.7 million in 13 years. To finance the project, the company needs to borrow $2.5 million today. The project will also produce intermediate cash flows of $250,000 per year that HSI can use to service coupon payments of $125,000 every six months. Based on the risk of this investment, market participants will require a 9.5% yield. If HSI wishes a maturity of 13 years (matching the arrival of the lump sum cash flow), what does the face value of the bond have to be? Recall that the compounding interval is 6 months and the YTM, like all interest rates, is reported on an annualized basis. (Enter just the number in dollars without the $ sign or a comma and round off decimals to the closest integer, i.e., rounding $30.49 down to $30 and rounding $30.50 up to $31.) Enter answer here
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