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

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

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  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.

    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. 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. just do the damn math equation
  4. Give the girl a break...our education system doesnt teach kids today what par value or face value means. Its very confusing to them.
  5. 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.

  6. TGregg


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