Final answer:
To determine the number of OID bonds needed to raise $3,000,000, a calculation of the present value of the bond cash flows at the market rate is required. The exact number of bonds depends on the price at which the OID bonds will be issued, which cannot be determined without additional information or calculations.
Step-by-step explanation:
To determine how many Original Issue Discount (OID) bonds Reinegar Corporation must issue to raise $3,000,000, we need to know the price at which the OID bonds will be sold. Since both bonds must provide the same effective yield to investors, we can assume the yield of the Par bond with a 10% semiannual coupon is the market rate for equivalent risk bonds.
The OID bond will have a semiannual coupon of 6.25% on a $1,000 par value, so each bond will pay $62.50 every six months. To find out the price at which the OID bonds must be issued, we need to calculate the present value of these cash flows (the semiannual interest and the par value at maturity) discounted at the market rate (which is equivalent to the yield of the Par bond).
Sadly, without the market yield or a financial calculator, we cannot calculate the exact price of each OID bond. But once the price is known, the number of bonds needed to raise $3,000,000 can be calculated as $3,000,000 divided by the price of one OID bond. This result should then be rounded up to the nearest whole number, as you cannot issue a fraction of a bond.