Question
On January 1, 2012, Central City issued a 20-year serial bond to finance improvements to the water distribution system. A total of $80,000,000 face value
On January 1, 2012, Central City issued a 20-year serial bond to finance improvements to the water distribution system. A total of $80,000,000 face value of bonds were issued with coupon and maturity rates as follows:
December 31, 2016 3.0% 5,000,000
December 31, 2021 3.5% 5,000,000
December 31, 2026 4.0% 10,000,000
December 31, 2027 4.1% 10,000,000
December 31, 2028 4.2% 10,000,000
December 31, 2029 4.3% 10,000,000
December 31, 2030 4.4% 15,000,000
December 31, 2031 4.5% 15,000,000
Central City received $80,500,000 from the bond issue. Calculate the NIC and TIC interest rates for the bond issue. What would the values be if the bonds before 2026 were 4.2 percent and bonds 5 percent after 2026?
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Risk Sensitive Investment Management
Authors: Mark H A Davis, Sébastien Lleo
1st Edition
9814578037, 978-9814578035
