Farrah Foundation has decided to raise S8OO,OOO for a new capital project by issuing bonds. They offered bonds that had a coupon rate of 6.7% compounded semi-annually and is redeemable in 7 years. At the same time, Farrah Foundation established a sinking fund to pay the S8OO,OOO back on the redemption date. The Sinking Fund earns interest at 6.6% compounded semiannually.

 a) Calculate the periodic expense of the debt.

b) Determine the book value of the debt after 5 years?

Answer rating: 100% (QA)

a To calculate the periodic expense of the debt we first need to find the semiannual intere... View the full answer