Interest is paid annually what is the expected price of


As an alternative to zero coupon bonds, Pacific Oil is considering the issuance of "deep discount" bonds. The bonds would have a 10-year maturity, $1,000 par value, and a 6% coupon rate even though the yield-to-maturity is expected to be 14%. Interest is paid annually. What is the expected price of each bond? In order to raise the needed $400,000,000, how large must the principal of the bond issue be?

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