The bonds would be used to fund a $40,000,000 initiative for a company.

Years to maturity: 25

Required return: 5.25%

Amount needed: $40,000,000

Face value: $1,000

Coupon rate: 5.75%

Tax rate: 21%

Year bond is called: 8

Spread above Treasury: 0.40%

Treasury rate at call: 4.80%

Treasury rate at call: 6.20%

The firm is considering issuing either a coupon bond (info above) or a zero coupon bond. The yield on either will be 5.25%. The face value is the same for both bonds.

Use the information above to calculate the value of coupon bond, zero coupon bond, of coupons needed and zero coupons needed.

Answer rating: 100% (QA)

To calculate the value of the coupon bond and the zero coupon bond we can use the present value ... View the full answer