Selling bonds. Lunar Vacations needs to raise $6,300,000 for its new project (a golf course on the moon). AstroInvestment Bank will sell the bond for a commission of 2.6%. The market yield is currently 7.5% on twenty-yearsemiannual bonds. If Lunar wants to issue a 6.5% semiannual coupon bond, how many bonds will it need to sell toraise the $6,300,000? Assume that all bonds are issued at a par value of $1,000....How many bonds will Lunar need to sell to raise the $6,300,000?(Round to the nearest whole number.)

Bond valuation aims to determine the present value of a bond, which includes the principal repayment at maturity and monthly interest payments. This approach assists investors in determining if a bond is priced attractively in relation to its future returns while allowing issuers to make informed decisions regarding coupon rates and terms to offer. It is a fundamental tool for evaluating investment opportunities and making strategic financial decisions.The number of bonds to be sold is determined by dividing the amount to be raised by the value of the bond after commission.Calculation:Result:Therefore, the number of bonds to be sold is 7209.

Answered: How many bonds will Lunar need to sell…

Business

Finance

How many bonds will Lunar need to sell to raise the $6,300,000? (Round to the nearest whole number.)

College Accounting, Chapters 1-27

23rd Edition

ISBN:9781337794756

Author:HEINTZ, James A.

Publisher:HEINTZ, James A.

Chapter22: Corporations: Bonds

Section: Chapter Questions

Problem 1CE

See similar textbooks

Related questions

Q: A 7 year bond costs $30,000 and will pay a total of $3,600 in interest over its lifetime. What is…

A: Simple interest (I) = P * R * T where P = Principle / Base amount R = rate of interest T = Time R…

Q: How many bonds must GE sell to net $299 million after flotation costs? Assume that fractions of…

A: 1 answer Proceeds after floatation cost= Amount (1- floatation cost) 299000000 = Amount (1- 0.08)…

Q: A Treasury bill that settles on May 18, 2022, pays $100,000 on August 21, 2022. Assuming a discount…

A: A bond is a kind of debt security issued by the government and private companies to the public for…

Q: What would you pay for a $195,000 debenture bond that matures in 15 years and pays $9,750 a year in…

A: Introduction: Debenture bonds are issued by the organization to borrow money for its business…

Q: Suppose that the prices of zero-coupon bonds with various maturities are given in the following…

A: The forward rate of interest refers to the interest rate agreed upon today for a loan that will be…

Q: What would you pay for a $205,000 debenture bond that matures in 15 years and pays $10,250 a year in…

A: Issue price of the bonds = Present value of principal + Present value of interest payments where,…

Q: Suppose Harry Davis issues 30-year debt with a par value of $1,000 and a coupon rate of 10%, paid…

A: We need to use approximation method for calculation of cost of debt Cost of debt =I(1-T)…

Q: Suppose that someone owns a 30 year $24,000 T-bond with a rate of 4%. After 6 years the bond is sold…

A: a. Total amount paid for 6 years = Face value of bond * T bond rate * Years Total amount paid for 6…

Q: Suppose a Google.com bond will pay $4,000 ten years from now. If the going interest rate on safe…

A: A financial instrument that does not affect the ownership of the common shareholders or management…

Q: Laura Hall is planning to buy 10-year zero coupon bonds issued by the U.S. Treasury. If these bonds…

A: As the name indicates zero coupon bonds do not pay periodic coupons. Instead they are issued at a…

Q: Suppose that you purchase the T-bill maturing on September 15, 2020, for 9,991.362. The T-bill…

A: Treasury bills (T- bills) are the debt securities which are low risk based and issued by U S…

Q: Marty Corp is issuing a perpetual bond today that will pay $100 per year starting in 3 years. If…

A: Given: Particulars Amount Amount paid $100 Years 3 Cost of capital 5%

Question

Selling bonds. Lunar Vacations needs to raise $6,300,000 for its new project (a golf course on the moon). Astro
Investment Bank will sell the bond for a commission of 2.6%. The market yield is currently 7.5% on twenty-year
semiannual bonds. If Lunar wants to issue a 6.5% semiannual coupon bond, how many bonds will it need to sell to
raise the $6,300,000? Assume that all bonds are issued at a par value of $1,000.
...
How many bonds will Lunar need to sell to raise the $6,300,000?
(Round to the nearest whole number.)

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1: Introduction:

VIEW

Step 2: Computation of number of bonds to be sold:

VIEW

Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Selling bonds. Lunar Vacations needs to raise $6,300,000 for its new project (a golf course on the moon). Astro Investment Bank will sell the bond for a commission of 2.7%. The market yield is currently 7.8% on twenty-year semiannual bonds. If Lunar wants to issue a 5.9% semiannual coupon bond, how many bonds will it need to sell to raise the $6,300,000? Assume that all bonds are issued at a par value of $1,000.
(Cost of debt) Gillian Stationery Corporation needs to raise $610,000 to improve its manufacturing plant. It has decided to issue a $1,000 par value bond with an annual coupon rate of 7.9 percent with interest paid semiannually and a 15-year maturity. Investors require a rate of return of 10.7 percent. a. Compute the market value of the bonds. b. How many bonds will the firm have to issue to receive the needed funds? c. What is the firm's after-tax cost of debt if the firm's tax rate is 34 percent? a. The market value of the bonds is $ (Round to the nearest cent.) b. The number of bonds that the company needs to sell isbonds. (Round up to the nearest integer.) c. The firm's after-tax cost of debt is. (Round to two decimal places)
Please solve it in excel with Formulas explanation
Global Exporters wants to raise $31.3 million to expand its business. To accomplish this, it plans to sell 15-year, $1,000 face value, zero coupon bonds. The bonds will be priced to yield 6.5 percent. What is the minimum number of bonds it must sell to raise the money it needs? Assume semiannual compounding. 69,800 86,029 81,705 O 74,907 O 73,255
(Cost of debt) Sincere Stationery Corporation needs to raise $500,000 to improve its manufacturing plant. It has decided to issue a $1,000 par value bond with an annual coupon rate of 10 percent with interest paid semiannually and a 10-year maturity. Investors require a rate of return of 9 percent. a. Compute the market value of the bonds. b. How many bonds will the firm have to issue to receive the needed funds? c. What is the firm's after-tax cost of debt if the firm's tax rate is 34 percent?
1. Calipe is considering buying some 10 year government bonds. They have a redemption value of $2,000 and biannual coupon payments of $50. If the current bond market is returning a rate equal to item 1, compounded biannually, what should Calipe be prepared to pay for them?2. Sebastian is considering buying shares in Aardvark Inc. which are currently providing a rate of return as shown in item 6. If the current government bond rate is shown in data item 1 and the market return is shown in item 5, what is the Beta on Aardvark shares and what does this signify to investors if it assumed they are currently priced on the CAPM line? Enter the beta to three decimal places.
Kindly answer using the formula: Monster Limos plans to issue new bonds that have the same yield as its existing bonds, which have a coupon rate of interest equal to 4 percent (paid semiannually), eight years remaining until maturity, and a $1,000 maturity value. The existing bonds are currently selling for $886 each. What should be the coupon rate for the new bonds? If the firm’s marginal tax rate is 40 percent, what will be the after-tax cost of debt associated with the new debt (bonds)?
(Cost of debt) Sincere Stationery Corporation needs to raise $459,000 to improve its manufacturing plant. It has decided to issue a $1,000 par value bond with an annual coupon rate of 11.2 percent with interest paid semiannually and a 15-year maturity. Investors require a rate of return of 8.6 percent. a. Compute the market value of the bonds. b. How many bonds will the firm have to issue to receive the needed funds? c. What is the firm's after-tax cost of debt if the firm's tax rate is 34 percent? a. The market value of the bonds is $ (Round to the nearest cent.)
Manshukh
An insurance company must make payments to a customer of $20 million in 1 year and $8 million in 5 years. The yield curve is flat at 10%. If it wants to fully fund and immunize its obligation to this customer with a single issue of a zero-coupon bond, what maturity bond must it purchase? (in years, use four decimal places) What must be the face value and market value of that zero-coupon bond? (in millions, use two decimal places)
(Cost of debt) Sincere Stationery Corporation needs to raise $500,000 to improve its manufacturing plant. It has decided to issue a $1,000 par value bond with an annual coupon rate of 14 percent and a maturity of 10 years. The investors require a rate of return of 9 percent. a. Compute the market value of the bonds b. What will the net price be if flotation costs are 10.5 percent of the market price? c. How many bonds will the firm have to issue to receive the needed funds? d. What is the firm's after-tax cost of debt if its average tax rate is 25 percent and its marginal tax rate is 21 percent? e. Rework the problem as follows: Assume a coupon rate of 8 percent. f. What effect does changing the coupon rate have on the firm's after-tax cost of capital? Why is there a change? GUD a. If the bond's annual coupon rate is 14%, what is the market value of the bond? (Round to the nearest cent.) b. What will the net price be if flotation costs are 10.5 percent of the market price? (Round to…
finance