Honda needs to raise RM 5 million and plan to issue a 30-year bond for this purpose. The current required return on Honda’s bond issue will be 6 per cent. The top management of Honda evaluating two-issue alternatives: a semiannual coupon bond with a 5 per cent coupon rate and zero-coupon bond. The company’s tax rate in Malaysia is 23 per cent.   How many coupon bonds and zeroes coupon bonds would Honda need to issue to raise the RM 5 million?

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Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.