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Whipple Corp. just issued 300,000 bonds with a coupon rate of 6.14 percent paid semiannually that...

Whipple Corp. just issued 300,000 bonds with a coupon rate of 6.14 percent paid semiannually that mature in 25 years. The bonds have a YTM of 6.58 percent and have a par value of $2,000. How much money was raised from the sale of the bonds? (Round your intermediate calculations to two decimal places and final answer to the nearest whole dollar amount.)

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Answer #1

The question is solved with the help of a financial calculator

Number of bonds= 300,000

Future value= $2,000

Time= 25 years*2= 50 semi-annual periods

Yield to maturity= 6.58%/2= 3.29%

Coupon payment = 6.14%/2= 3.07% 0.0307*2,000= $61.40

The present value of the bonds is calculated by entering the below in a financial calculator:

FV= 2,000; N= 50; I/Y= 3.29; PMT= 61.40

Press CPT and PV to calculate the present value of the bonds

The present value of the bonds is $1,892.77.

Money raised from the sale of the bonds= $1,892.77*300,000 = $567,831,000.

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