Question
Blackberry Energy is planning to issue two types of 25-vear. non-callable bonds to raise a total of $6 million. First 3,000 bonds with a 10%
Blackberry Energy is planning to issue two types of 25-vear. non-callable bonds to raise a total of $6 million. First 3,000 bonds with a 10% annual coupon rate will be sold at their $1,000 par value to raise $3 million. Second. original issue discount (OID) bonds, also with a 25-year maturity and a $1,000 par value, will be sold, but these bonds will have a nominal coupon of only 6.85%.
also with annual payments. The OID bonds must be offered at a discount (i.e., below par) in order to provide investors
with the same vield as the par bonds. How many OID bonds must the firm issue to raise the other $3 million? You may round your answer up or down to a whole number of bonds.
Hint: Calculate the price of OID bonds (given the nominal coupon rate and yield of 10%), and divide that price into the $3 million.
Your answer should be between 3151 and 4850, with no special characters.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started