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nsdq007 nsdq007
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2 weeks ago
Stock and Bond Markets

Poly's Portable Peanut Butter needs to raise $40,000 for an expansion. To get the funds, the company has decided to sell bonds with a principal of $1250 and a yearly coupon payment of $145.

How many bonds must Poly's Portable Peanut Butter sell to raise the necessary funds? What is the interest rate of the bonds? Please round your answer to two decimal places.

▸ 32.00 bonds, 11.60%

▸ 275.86 bonds, 11.60%

▸ 32.00 bonds, 3.13%

▸ 275.86 bonds, 3.13%
Textbook 

Macroeconomics


Edition: 3rd
Authors:
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cglotfeltycglotfelty
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2 weeks ago
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32.00 bonds, 11.60%

The number of bonds that need to be sold to raise $40,000 for expansion is equal to the amount needed divided by the principal.
Number of bonds = amount needed/principal = 40,000/1250 = 32.00 bonds

The interest rate on the bond is the coupon payment divided by the principal.
Interest rate = 100*(145/1250) = 11.60%
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