Moon Software Inc

question 35

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 6.75%.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) 3,669
• B) 3,327
• C) 3,925
• D) 4,821
• E) 4,266

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Definitions:

Parasitic Worm

A creature that resides within or on a host organism, deriving its nourishment from or to the detriment of the host.

Specimen

A sample taken for scientific testing or analysis.

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A long-lasting liver disease in which normal liver tissue is replaced with nonfunctioning scar tissue.

Liver

A vital organ involved in numerous metabolic processes, including detoxification, protein synthesis, and the production of biochemicals necessary for digestion.