Rubbermaid recently wrote off $150 million in an effort to streamline its operations. They now need to raise additional capital. Rubbermaid’s investment bankers have examined Rubbermaid’sfinancial records and their business and determined that Rubbermaid’s debt must promise a yield of 8%. This is for debt with a one-year maturity. Rubbermaid wants to raise $100 million. The bonds will each have a face value of $1000.
a.) If Rubbermaid issues bonds with a coupon rate of 8%, what will each bond sell for?
b.) Rubbermaid needs to raise $100 million. How many bonds do they need to sell to raise this
amount?
c.) What is the total repayment that Rubbermaid is promising to make next year?

Answer rating: 100% (QA)

a If Rubbermaid issues bonds with a coupon rate of 8 they will sell for their face value because the coupon rate is equal to the required yield Theref... View the full answer