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Question: Colwood Corp needs to raise funds to finance a plant expansion and has decided to issue 25-year zero coupon bonds to raise the money. The required return on the bonds will be 8.03%.

a. If the face value is $1,000, what will the bonds sell for at issuance?

b. How many zero coupon bonds will they have to issue to raise $2,175,000?

c. Suppose an investor is willing to purchase a 25 year maturity zero coupon bond with a face value of $1,000 for $250. What is the required return?

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