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What will be the price of the zero coupon bonds

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Reference no: EM133013102

Question - Bonaqua Alison Corporation Limited is planning to issue 10-year bonds with a face value of $1,000. The current market rate for similar bonds is 6.5%. Assume that coupon payments will be semi-annual. The company is trying to decide between issuing a 7.5% coupon bond or a zero coupon bond. The company needs to raise $1 million.

a. What will be the price of the 7.5% coupon bonds?

b. How many coupon bonds would have to be issued?

c. Is the bond selling at a discount and why?

d. What will be the price of the zero coupon bonds?

Reference no: EM133013102

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