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# How Many Bonds to Issue to gain 2,000,000.

Discussion in 'Economics' started by Laratrx, Jun 24, 2009.

Not open for further replies.
1. ### Laratrx

Hi, I apologize if this is not the right forum to post this kind of threads but I have a question I need some assistance with.

Question:
Let's assume I'm a Contractor, and I decide to open a new business which is to [build a kindergarten school].

The Total Cost of Building the school is: \$2,000,000

I'm required to use BONDS to rise/increase the capital.

Coupon/Bond Value:
-------------------
Par Value/Face Value: \$10,000

Coupon Rate: 10 %

Coupon Payment: \$500
{ Every Six Months (Semiannually):
0.10 x \$10,000 = \$1,000/2 = \$500 }

Maturity Date: 20 Years

Market Rate 15 %

I'm required to Issue (as many Coupons/Bonds as needed) to raise the \$2,000,000 required to build the school.

How many Bonds will I have to Issue to gain \$2,000,000?

I read that I have to evaluate the Present Value (PW) of the bonds and then (Issue the bonds) depending on the result of the Present Value.

I still don't know exactly how to start the problem, any help the matter would be appreciated. Thank You!

2. ### peilthetraveler

Face value of the bonds are 10,000 dollars. That means 1 bond is 10,000\$ So 2,000,000\$ in bonds is 2,000,000/10,000 = 200 bonds. Very simple.

3. ### snowhite

just do the damn math equation

4. ### peilthetraveler

Give the girl a break...our education system doesnt teach kids today what par value or face value means. Its very confusing to them.

This is wrong, the bonds will be trading below the \$10,000 face value because at that price they yield 10% the market is at 15%... bonds will have to be sold below par to bring the yield up to 15%.

To the OP, don't ask for homework advice from idiots on the internet... if you can't figure it out drop out and be a trader. Quit wasting your or your parents money by cheating.

5yr

6. ### TGregg

This "girl" is the same person who posted the other newbie question a few days ago.