Thermo-Tech Systems recently sold a $20 million bond issue with a 20-year maturity and a coupon rate
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Question:
Thermo-Tech Systems recently sold a $20 million bond issue with a 20-year maturity and a coupon rate of 7% compounded semiannually. The bond indenture contract requires Thermo-Tech to make equal payments at the end of every 6 months into a sinking fund, which should accumulate the full $20 million required to redeem the bonds at their maturity. (Round all values to the nearest $).
a. What should be the size of the sinking fund payments if the fund earns 4.5% compounded semiannually?
b. How much will the fund earn in the sixth year?.
c) How much will the fund increase in the 27th payment interval?
d. What is the semiannual cost of the debt
Related Book For
Intermediate Accounting IFRS
ISBN: 978-1119372936
3rd edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
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