Answer:
Amount Raised = $484,702,949.4 or 484.703 million
Explanation:
To calculate the amount of money raised from the sale of bonds, we must first calculate the price at which bonds were sold.
To calculate the price of the bond today, we will use the formula for the price of the bond. We assume that the interest rate provided is stated in annual terms. As the bond is a semi annual bond, the coupon payment, number of periods and semi annual YTM will be,
Coupon Payment (C) = 2000 * 0.0587 * 6/12 = $58.7
Total periods (n) = 20 * 2 = 40
r or YTM = 0.0631 * 6/12 = 0.03155 or 3.155%
The formula to calculate the price of the bonds today is attached.
Bond Price = 58.7 * [( 1 - (1+0.03155)^-40) / 0.03155] + 2000 / (1+0.03155)^40
Bond Price = $1900.79588 rounded off to $1900.80
The amount of money raised from the sale of 255000 bonds is,
Amount Raised = 255000 * 1900.79588
Amount Raised = $484,702,949.4 or 484.703 million
