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A corporation is planning to issue two 25-year bonds. One will be sold at its par $1000, with a 10% semiannual coupon. The OID bond
A corporation is planning to issue two 25-year bonds. One will be sold at its par $1000, with a 10% semiannual coupon. The OID bond (Original Issue Discount) will also have a $1000 par value, but its semiannual coupon is only 6%. If both bonds are able to provide investors with the same effective yield, how many OID bonds will the company have to issue to raise $3,000,000? Disregard flotation costs.
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