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XYZ Inc plans to raise $30 million to fund its investment projects. it is looking into issuing 10-year smi-annual coupon bods with a nominal coupon...

XYZ Inc plans to raise $30 million to fund its investment projects. it is looking into issuing 10-year smi-annual coupon bods with a nominal coupon rate 8% per annum and a face value of $1000. it is anticipated that investors require a nominal yield to maturity of 7% per annum compounded semi annually.

a) calculate the required number of semi annual coupon bonds to be issued on order to raise $30 million.

b) XYZ Inc is also looking into issuing 15 year zero coupon bonds with a face value of $1000. Calculate the required number of zero coupon bonds to raise $30 million if the effective yield to maturity remains the same as that of the 10 year semi annual coupon bonds. The pricing is based on semi annual coupons.

c) determine and explain which bond issuance. 10 year semi annual coupon bond or the 15 year zero coupon bond s subjected to a higher interest rate risk.

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1 Face Value $1,666.66 2 Semi annual coupon 4.66% 5‘. Semi annual m1 3.36% a, 5 6 Time Cash flow P12 P6'*fime '2 1 $46.66 $38.63 $38.63
8 2 $46.66 $32.34 $24.68
6 3 $46.66 $36.68 $168.23
11] 4...

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