Reinegar Corporation is planning two new issues of 25-year bonds. Bond Par will be sold at its $1,000 par value, and it will have a 10% semiannual coupon. Bond OID will be an Original Issue Discount bond, and it will also have a 25-year maturity and a $1,000 par value, but its semiannual coupon will be only 7.00%.

If both bonds are to provide investors with the same effective yield, how many of the OID bonds must Reinegar issue to raise $3,000,000?

Disregard flotation costs, and round your final answer up to a whole number of bonds.

Answers:

a.

4,337

b.

4,562

c.

4,132

d.

4,228

e.

4,448