Moon Software Inc

question 74

Multiple Choice

Moon Software Inc.is planning to issue two types of 25-year,noncallable bonds to raise a total of $6 million,$3 million from each type of bond.First,3,000 bonds with a 10% semiannual coupon will be sold at their $1,000 par value to raise $3,000,000.These are called "par" bonds.Second,Original Issue Discount (OID) bonds,also with a 25-year maturity and a $1,000 par value,will be sold,but these bonds will have a semiannual coupon of only 6.25%.The OID bonds must be offered at below par in order to provide investors with the same effective yield as the par bonds.How many OID bonds must the firm issue to raise $3,000,000? Disregard flotation costs,and round your final answer up to a whole number of bonds.

• A)4,228
• B)4,337
• C)4,448
• D)4,562
• E)4,676

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Definitions:

Welfare Capitalism

An economic system that combines a predominantly market-based economy with extensive social welfare programs.

Unionization

The process by which workers form or join a union to collectively negotiate with their employer regarding wages, working conditions, and other employment terms.

Intimidation

The act of threatening or coercing someone into doing or not doing something, often used in contexts of labor disputes or competitions to unduly influence parties.

CIO

Congress of Industrial Organizations, a federation of unions that organized workers in industrial unions in the United States and Canada from 1935 to 1955.