Question
The second project is an office building complex. This project takes 20 years to build complete and will be financed by a bond with the
The second project is an office building complex. This project takes 20 years to build complete and will be financed by a bond with the following structure: The bond will have a notional of UF1,000,000 at a coupon rate of UF + 2.5% compounded annually, payments quarterly. The first 5 years only pay interest. The following 5 years will pay UF20,000 in each coupon and the last 10 years will have structure installment. a) Develop the Bond structure (Interest, amortization, flow and current capital) b) Suppose that you are an investor and you buy the Bond from the company at the time it is issued. If the IRR of purchase was 3%, how much did you pay for the bonus? c) One year after purchasing the bond, you expect a rate increase of 0.75%, how much could be the loss of your investment? d) Right at the end of the tenth year you decide to sell the Bond. The market IRR is 5%. What is the sales price? e) What is the annual IRR of the entire operation of these 10 years?
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