Question: 18. A $75 million face value bond carrying a 4.45% coupon is issued with 35 years until maturity. The sinking fund provision requires 80% of

18. A $75 million face value bond carrying a 4.45% coupon is issued with 35 years until maturity. The sinking fund provision requires 80% of the face value to be saved up by the maturity date. The sinking fund is projected to earn 4.95% compounded semi-annually.

A. Calculate the total interest earned by the sinking fund.

B. Calculate the annual cost of the bond debt.

C. Determine the book value of the bond debt after the 29th payment.

ANS:

A. $37,087,119.77

B. $3,992,153.70

C. $61,351,698.69

Show ALL your work even if you used a calculator. You MUST use the TI BA II calculator features (N, I/Y, PV, PMT, FV) to solve questions whenever possible.

DO NOT answer if you are not using calculator features

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