Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A company issued bonds worth $750,000, with a coupon rate of 7% compounded semi-annually, and set up a sinking fund to retire the debt in

A company issued bonds worth $750,000, with a coupon rate of 7% compounded semi-annually, and set up a sinking fund to retire the debt in 15 years. It made deposits at the end of every 6 months into the fund, and the fund was earning 8.2% compounded semi-annually. Find the periodic expense of the debt. Find the book value of the debt after 8 years. Construct the sinking fund schedule for the 10th year.

1. Find the periodic expense of the debt.

PMT Setting
N
I/Y
P/Y
C/Y
PV
PMT
FV

2. Find the book value of the debt after 8 years.

PMT Setting
N
I/Y
P/Y
C/Y
PV
PMT
FV

3. Construct the sinking fund schedule for the 10th year.

Payment NumberPeriodic PaymentInterest for Payment IntervalIncrease in FundFund BalanceBook Value


Step by Step Solution

3.36 Rating (159 Votes )

There are 3 Steps involved in it

Step: 1

Part a Assumed that the bond pays interest semi annually Periodic expense of debt Semi annual intere... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Document Format ( 2 attachments)

PDF file Icon
635d68d839490_175322.pdf

180 KBs PDF File

Word file Icon
635d68d839490_175322.docx

120 KBs Word File

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managerial Economics

Authors: Mark Hirschey

12th edition

9780324584844, 324588860, 324584849, 978-0324588866

More Books

Students also viewed these Banking questions

Question

What measure of effect size is used with chi square?

Answered: 1 week ago

Question

Briefly describe the process of computing a corporation's AMT.

Answered: 1 week ago