Reference no: EM132876864

Question - Metro City needs $200 million to build a light rail system. The city's financial advisors believe that it will be able to borrow the money by issuing a 30-year bond with an annual coupon rate of 4.8 percent that pays interest every 6 months. However, interest rates have been very volatile over the last year, ranging from 4.6 percent to 5.1 percent for borrowers with Metro's credit rating. As a result, Metro's town manager is concerned. If rates rise while the offering is in registration, Metro will not get the $200 million it needs from the sale of its bonds. To make sure they will be able to raise enough money, Metro's financial advisors have recommended that Metro register a total of $250 million worth of bonds. In the event that rates rise above 4.8 percent, Metro will sell enough additional bonds to get the $200 million it needs for the rail system. If rates rise to 4.95% on the day the bonds are sold, how much would metro receive from the sale of $200million worth of bonds? What is the par value of the additional bonds that metro must sell to raise the required $200million.