attention on 6-17
PART 1 238 the beginning, which is more common. What is the present value of the obligation? How much did the bank lose by allowing pay ments at the end of each year rather than at the beginning? 6-16. Metro City needs $200,000,000 to build a Light rail system. The city's financial advi- sors believe that it will be able to borrow the money by issuing a 30-year bond with an annual coupon rate of 4.8 percent that prys interest every 6 months. However, interest rates have been very volatile over the last year, ranging from 4.6 percent to 5.1 percent for borrowers with Metro's credit rating. As a result, Metro's town manager is concerned. If rates rise while the offering is in registration, Metro will not get the $200 million it needs from the sale of its bonds. To make sure they will be able to raise enough money, Metro's financial advisors have ree ommended that Metro register a total of $250 million worth of bonds. In the event that rates rise above 4.8 percent, Metro will sell enough additional bonds to get the $200 mortgage to pay of the principal its current more decided to use the interest rating more the discount ralent analysis. Be sure to include the costing in the amount 6-18. New University plans to issue a $2,000,000 bond. The money it to buy equipment for its physics laboratodes. The bond matures in 10 years and requires semiannual inter est payments. The stated interest rate is 6 percent, but rates have fallen to 5-96 percent in the market. How much will the university 6-19. Assume an organization could issue a coupon bond at an annual interested 4 percent with semiannual compounding for 20 years. If it receives $2,26445 for the bond, how much would it have to pay the 6-20. On January 1, 2016, Central City 20-year serial bond to finance improve to the water distribution system. A total $80,000,000 face value of bonds were December 31, 2025 3.5% 55.000 you intend to borrow receive when it issues the bond? maturity date? December 31, 2020 3.0% with coupon and maturity rates as follow $ 5.000 $10.000.00 $10,000.00 42% $70.000 $15.000 million it needs for the rail system 1. If rates rise to 4.95 percent on the day the bonds are sold, how much would Metro receive from the sale of $200 mil- lion worth of bonds? 2. What is the par value of the additional bonds that Metro must sell to raise the required $200 million 6-17. Fifteen years ago, The Food Pantry bought a new building for $600,000. It borrowed $900,000 on a 30-year mortgage with a 6 percent fixed rate and monthly payments. The current outstanding balance on the mort- page is $355.000. Today, the organization can get a 15-year fixed-rate mortgage with an interest rate of 432 percent. The mortgage would require monthly payments in arrears. It will cost The Food Pantry $20,000 to do the refinancing. Should the organization refi- nance the mortgage under those terms? Hints: Since you know The Food Pantry could use the $20,000 it will cost to refinance the December 31, 2030 40% December 31, 2031 December 31, 2032 December 31, 2033 43% $10.000,00 December 31, 2034 44% December 31, 2035 45% $15.000.000 Central City received $80.500,000 from the bond issue. Use a spreadsheet program the NIC and TIC interest rates for the head issue. What would the values for be if the interest rate were 42 penetre bonds with a maturity before 200 ml cent for the bonds with a maturity later? (Note: If you set up your smaller with formulas, you should only have today the interest rates to get the new Cat values.) Review chapter content and explore online resources at study.sagepub.com/finkles PART 1 238 the beginning, which is more common. What is the present value of the obligation? How much did the bank lose by allowing pay ments at the end of each year rather than at the beginning? 6-16. Metro City needs $200,000,000 to build a Light rail system. The city's financial advi- sors believe that it will be able to borrow the money by issuing a 30-year bond with an annual coupon rate of 4.8 percent that prys interest every 6 months. However, interest rates have been very volatile over the last year, ranging from 4.6 percent to 5.1 percent for borrowers with Metro's credit rating. As a result, Metro's town manager is concerned. If rates rise while the offering is in registration, Metro will not get the $200 million it needs from the sale of its bonds. To make sure they will be able to raise enough money, Metro's financial advisors have ree ommended that Metro register a total of $250 million worth of bonds. In the event that rates rise above 4.8 percent, Metro will sell enough additional bonds to get the $200 mortgage to pay of the principal its current more decided to use the interest rating more the discount ralent analysis. Be sure to include the costing in the amount 6-18. New University plans to issue a $2,000,000 bond. The money it to buy equipment for its physics laboratodes. The bond matures in 10 years and requires semiannual inter est payments. The stated interest rate is 6 percent, but rates have fallen to 5-96 percent in the market. How much will the university 6-19. Assume an organization could issue a coupon bond at an annual interested 4 percent with semiannual compounding for 20 years. If it receives $2,26445 for the bond, how much would it have to pay the 6-20. On January 1, 2016, Central City 20-year serial bond to finance improve to the water distribution system. A total $80,000,000 face value of bonds were December 31, 2025 3.5% 55.000 you intend to borrow receive when it issues the bond? maturity date? December 31, 2020 3.0% with coupon and maturity rates as follow $ 5.000 $10.000.00 $10,000.00 42% $70.000 $15.000 million it needs for the rail system 1. If rates rise to 4.95 percent on the day the bonds are sold, how much would Metro receive from the sale of $200 mil- lion worth of bonds? 2. What is the par value of the additional bonds that Metro must sell to raise the required $200 million 6-17. Fifteen years ago, The Food Pantry bought a new building for $600,000. It borrowed $900,000 on a 30-year mortgage with a 6 percent fixed rate and monthly payments. The current outstanding balance on the mort- page is $355.000. Today, the organization can get a 15-year fixed-rate mortgage with an interest rate of 432 percent. The mortgage would require monthly payments in arrears. It will cost The Food Pantry $20,000 to do the refinancing. Should the organization refi- nance the mortgage under those terms? Hints: Since you know The Food Pantry could use the $20,000 it will cost to refinance the December 31, 2030 40% December 31, 2031 December 31, 2032 December 31, 2033 43% $10.000,00 December 31, 2034 44% December 31, 2035 45% $15.000.000 Central City received $80.500,000 from the bond issue. Use a spreadsheet program the NIC and TIC interest rates for the head issue. What would the values for be if the interest rate were 42 penetre bonds with a maturity before 200 ml cent for the bonds with a maturity later? (Note: If you set up your smaller with formulas, you should only have today the interest rates to get the new Cat values.) Review chapter content and explore online resources at study.sagepub.com/finkles
