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A city has financed a local project with a $500,000 bond issue with a coupon rate of 3% compounded semi-annually. The bonds are redeemable in
A city has financed a local project with a $500,000 bond issue with a coupon rate of 3% compounded semi-annually. The bonds are redeemable in 12 years. At the same time, a sinking fund earning interest at 4.2% compounded semi-annually is established to accumulate the full $500,000 when the bonds mature in 12 years.
- Find the periodic expense of the debt.
- Find the book value of the debt after 7 years.
- Construct the sinking fund schedule for the 9th 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 7 years.
| P1 | |
| P2 | |
OR
| PMT Setting | |
| N | |
| I/Y | |
| P/Y | |
| C/Y | |
| PV | |
| PMT | |
| FV |
3. Construct the sinking fund schedule for the 9th year.
| Payment Number | Periodic Payment | Interest for Payment Interval | Increase in Fund | Fund Balance | Book Value |
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