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XYZ corporation would like to raise $25 million to invest in capital expenditures. The company plans to issue five-year bonds with a face value of

XYZ corporation would like to raise $25 million to invest in capital expenditures. The company plans to issue five-year bonds with a face value of $1000 and a coupon rate of 4.75% (semi-annual payments). The following table summarizes the yield to maturity for five-year coupon corporate bonds of various ratings:

Rating

AAA

AA

A

BBB

BB

Yield to maturity

6.20%

6.50%

6.75%

6.90%

7.50%

How much total principal amount of these bonds must XYZ issue to raise $25 million today, assuming the bonds are AA rated? (Because XYZ cannot issue a fraction of a bond, assume that all fractions are rounded to the nearest whole number.)

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