Genome Ltd intends to issue 7-year bonds with semi-annual coupon payments. The market interest rate for such bonds is 8%. Coupon payments will be made at a rate of 9.0%. The management of Genome has determined that the company needs to raise $875,000 to fund the purchase of a new office and will use the proceeds of the bond issue for that purpose.

Do explain where you got the face value, interest rates etc.

1. Calculate the price of these 9.0% coupon bonds.
2. State and explain whether these bonds are premium or discount bonds.
3. How many of these 9.0% coupon bonds would the company issue?
4. Calculate the price of these bonds, if they paid no coupons to investors. Assume semi- annual compounding for these zero-coupon bonds.
5. How many of the zero-coupon bonds would the company need to issue?