Lopez Information Systems management is planning to issue 10-year bonds.

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QUESTION:

Lopez Information Systems management is planning to issue 10-year bonds. The going market yield for such bonds is 8.125 percent. Assume that coupon payments will be made semiannually. Management is trying to decide between issuing an 8 percent coupon bond or a zero-coupon bond. Lopez needs to raise $1 million. What will the price of an 8 percent coupon bond be, and how many 8 percent coupon bonds will have to be issued?

What will the price of a zero-coupon bond be, and how many zero-coupon bonds will have to be issued?


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