Metasale Ltd is issuing 8-year bonds with a coupon rate of 7.99 per cent and semi­ annual coupon payments. If the current market rate for similar bonds is 9.53 per cent, what will be the bond price? Assume each bond has a face value of $1000. If the company wants to raise $1.25 million, how many bonds does it have to sell?

To calculate the bond price, we need to calculate the present value of the bond's cash flows, which are the coupon payments and the face value at maturity.

Step 1: Calculate the semi-annual coupon payment The coupon payment is 7.99% of the face value of $1000, paid semi-annually. So, the semi-annual coupon payment is (7.99/100)*1000/2 =$39.95

Step 2: Calculate the present value of the coupon payments The present value of the coupon payments is the sum of the present values of each individual payment. The present value of each payment is calculated using the formula PV = C / (1 + r/n)^(nt), where C is the coupon payment, r is the market rate, n is the number of compounding periods per year, and t is the time in years. In this case, r is 9.53%, n is 2 (since payments are semi-annual), and t ranges from 1 to 8 years. So, the present value of the coupon payments is the sum of $39.95 / (1 + 9.53/100/2)^(2*t) for t from 1 to 8, which is approximately$247.57.

Step 3: Calculate the present value of the face value The present value of the face value is the face value discounted back to the present using the market rate. So, the present value of the face value is 1000 / (1 + 9.53/100/2)^(2*8) = $466.64.

Step 4: Calculate the bond price The bond price is the sum of the present value of the coupon payments and the present value of the face value. So, the bond price is $247.57 +$466.64 = $714.21.

To raise $1.25 million, the company needs to sell$1.25 million / $714.21 = approximately 1750 bonds.