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Starbucks wants to raise money for expanding its European business. It issues a 10,754, $1,000 principal...

Starbucks wants to raise money for expanding its European business. It issues a 10,754, $1,000 principal bonds. They promise to pay a 11.4% coupon, paid quarterly for 7 years. If the YTM is 2.1%, how much money did they raise?

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Answer #1
Money raise = Issue Price or Price of Bond
Price of Bond = Present value of Future Cash flow
Discounted @ 0.525% (2.1%/4) for 28 times (28 Quarters) = 25.9668
Assumed maturity value without any premium or discount i.e Maturity is Rs. 1000
Year Cash Flow Type No. of Quarters Quarterly Interest Discount factor Discounted Interest
1 to 7 Coupon Amt 28 $    28.50 25.9668 $     740.05
(7yrs X 4) (=1000*11.4%/4)
7th Year Principal 1000 0.863 $     863.00
Present Value of Cash flow $ 1,603.05
Value per Bond $1,603.05
Total Bond issued 10754
Money Raised $ 17,239,241
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