Lend Lease Ltd is planning to issue 7-year bonds with semi-annual coupon payments. The market interest rate for such bonds is 8%. Coupon payments will be made at the 9.17% rate. The management of Lend Lease Ltd has determined the company needs to raise $875,000 to fund the purchase of a new office and wants to use the proceeds of the bond issue for that purpose.
i) Calculate the price of these 9.17% coupon bonds.
ii) State and explain whether these bonds are premium or discount bonds.
iii) Determine how many of these 9.17% coupon bonds the company would need to issue.
iv) Calculate the price of these bonds, if they paid no coupons to investors. Assume semiannual compounding for these zero-coupon bonds.
v) Determine how many of these zero coupon bonds the company would need to issue.