How many of the zeroes would you need to issue

Reference no: EM132207999

Question - Suppose your company needs to raise $30 million and you want to issue 20-year bonds for this purpose. Assume the required return on your bond issue will be 7.5 percent, and you're evaluating two issue alternatives: a 7.5 percent semiannual coupon bond and a zero coupon bond. Your company's tax rate is 35 percent.

Requirement 1:

(a) How many of the coupon bonds would you need to issue to raise the $30 million?

(b) How many of the zeroes would you need to issue?

Requirement 2: (a) In 20 years, what will your company's repayment be if you issue the coupon bonds?

(b) What if you issue the zeroes?

Reference no: EM132207999

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