Kintel, Inc., management wants to raise $1 million by issuing six-year zero coupon

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QUESTION:

Kintel, Inc., management wants to raise $1 million by issuing six-year zero-coupon bonds with a face value of $1,000. The company’s investment banker states that investors would use an 11.4 percent discount rate to value such bonds. At what price would these bonds sell in the marketplace? How many bonds would the firm have to issue to raise $1 million? Assume semiannual coupon payments?


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