JRJ Corporation Recently Issued 10-Year Bonds at a Price of $1,000

question 1

Multiple Choice

JRJ Corporation recently issued 10-year bonds at a price of $1,000. These bonds pay $60 in interest each six months. Their price has remained stable since they were issued, i.e., they still sell for $1,000. Due to additional financing needs, the firm wishes to issue new bonds that would have a maturity of 10 years, a par value of $1,000, and pay $40 in interest every six months. If both bonds have the same yield, how many new bonds must JRJ issue to raise $2,000,000 cash?

• A) 2,400
• B) 2,596
• C) 3,000
• D) 5,000
• E) 4,275