MyReality Pty Ltd needs to raise $1 million via a bond issuance to fund a project. They are deciding between issuing a zero-coupon bond or a 8% coupon-bond which pays coupons semi-annually. Either way they plan to issue 10-year bonds with a face value of $1000 and the ongoing market rate for such bonds is 7.5 per cent.

i. Assuming MyReality Pty Ltd wants to preserve cash over the next few years, which option would be better suited under this circumstance? Why? (2 marks)

ii. What will the price of the coupon bond be & how many of such bonds would have to be issued to raise the intended amount? (4 marks)

iii. What will the price of the zero coupon bonds be & how many of such bonds would have to be issued to raise the intended amount?