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Assume that Bestbuy wants to borrow $ 8 billion and to repay it in ten years. It intends to borrow, on Jan 1 ,

Assume that Bestbuy wants to borrow $8 billion and to repay it in ten years. It intends to borrow, on Jan 1, 2023, by issuing one of the following bonds:

i)  Ten year maturity, 7% annual coupon, paid semi-annually on June 30th and Dec 31st.

ii)  Ten year maturity zero coupon bonds

iii)  Ten year maturity, 12% annual coupon, paid semi-annually as above

A)  For each of the three choices, how many bonds will it have to issue to raise the $8 billion it needs? Assume that each bond has a face value of $1,000, and that the cost of debt for Best buy is 7% per year, APR.

B)  For each year from 2023 to 2032, list the total dollar amount, in millions, it will have to pay to the bondholders. Just the total $$$, not the discontinued present value.

 

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