To raise $5,000,000 to expand into new markets, a very successful laptop manufacturing company issued bonds with
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Question:
To raise $5,000,000 to expand into new markets, a very successful laptop manufacturing company issued bonds with a coupon rate of 4.75% compounded semi-annually, paying interest every 6 months, and redeemable in 16 years. They established a sinking fund to retire this debt on maturity and made equal deposits into the fund at the end of every 6 months.
a. If the fund was earning 4.00% compounded semi-annually, calculate the periodic cost of the debt.
Round the sinking fund payment up to the next cent
b. Calculate the book value of the debt at the end of 12 years.
Round to the nearest cent
Related Book For
Fundamentals of Investments Valuation and Management
ISBN: 978-0077283292
5th edition
Authors: Bradford D. Jordan, Thomas W. Miller
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