93 A major manufacturer decides to guarantee its maintenance payments for the following 5 years time....

   

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93 A major manufacturer decides to guarantee its maintenance payments for the following 5 years time. CEO of the company believes the best way to guarantee those payments is to keep some amount of government 5years zero-coupon bonds. One share of Bond having $1000 face value pays 7% annual interest. Maintenance cost for all the machines in the factory is $10000 for first year and will increase by $1000 every year. At an annual market interest rate of i= 7% find the minimum number of bonds the company should have today in order to meet all maintenance expenses in five years time? Explain your reason? (70p) 93 A major manufacturer decides to guarantee its maintenance payments for the following 5 years time. CEO of the company believes the best way to guarantee those payments is to keep some amount of government 5years zero-coupon bonds. One share of Bond having $1000 face value pays 7% annual interest. Maintenance cost for all the machines in the factory is $10000 for first year and will increase by $1000 every year. At an annual market interest rate of i= 7% find the minimum number of bonds the company should have today in order to meet all maintenance expenses in five years time? Explain your reason? (70p)

Answer rating: 100% (QA)

The problem described in the image asks to calculate the number of zerocoupon bonds a manufacturer should purchase to cover maintenance costs for five ... View the full answer