the government needs ten million for new dams and wanrs to i

the government needs ten million for new dams and wanrs to issue 19 year semi annual bonds for it. the bonds currently have 9.3% coupon rate and the YTM is 10%. how many issues of the bonds does the government need to issue?

Solution

Given coupon rate = 9.3 %

Yield to maturity rate is 10 %

If a bond\'s coupon rate is less than its YTM, then the bond is selling at a discount.

YTM=[(Face value/Bond price)^1/Time period]-1

using this equation we can get the relation in face value and the bond price.

Further we need face value of the bond to calculate exact number of issues.