A Firm Issues $500 Million in Twenty-Year Bonds with an Annual

Multiple Choice

A firm issues $500 million in twenty-year bonds with an annual coupon rate of 5%.The firm uses a sinking fund to repurchase 4% of the bond issue on each coupon payment date.What payment must they make on the first coupon payment date?

A) $20 million
B) $25 million
C) $35 million
D) $45 million
E) $145 million