The following information applies for parts e) and f). Fidget Spinners Inc. now decides to raise money through the issue of bonds. The company needs to raise $35 million to set up a new division to manufacture their products out of a new material.

They plan on issuing 18-year $1000 annual coupon bonds with a coupon rate of 6.4%. From market research, investors for comparable bonds expect a return of 5.5% p.a. compounding quarterly.

e) Draw a cash flow diagram for the purchase of a single such bond, then determine the price an investor would be willing to pay for this bond. (2 marks)

f) Despite the calculations done in part e), Fidget Spinners Inc. has decided to issue the bonds described above at a price of $960. The bond issue will incur a cost equal to 4% of the total money raised. How many bonds must be issued to raise a total of $32 million after costs? (2 marks)