Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

When it comes to investments, a government is no different than a business organization. Governments typically finance its project(s) via bonds. Once a bond is

When it comes to investments, a government is no different than a business organization. Governments typically finance its project(s) via bonds. Once a bond is issued, it might be prudent for a government to recall the bond depending on the interest rate and potential benefit. 

In a bond refunding, if NYS issues a 10 years bond previously for $1,000 face value, semi-interest rate of 8% percent annually. Assuming rates fell to 6%: 

Present Value @ 3% of a single sum of $1 = 0.553368  and Annuity of $1 = 14.87747.

Which statement holds true?

  

It is difficult to calculate the impact, given the limited information.

  

Since the new rate is lower, it will yield lower period bond interest and therefore result in gains. 

  

Costs of old issue must be more than the new issue.

  

The cost of the new issue is > $1,148.78


Step by Step Solution

There are 3 Steps involved in it

Step: 1

ANSWER C Costs of the old issue must be more than the new issue Bond refunding is a corporate action ... 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

Step: 3

blur-text-image

Document Format ( 2 attachments)

PDF file Icon
6363a9c89d1bb_238488.pdf

180 KBs PDF File

Word file Icon
6363a9c89d1bb_238488.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

Business and Administrative Communication

Authors: Kitty o. locker, Donna s. kienzler

10th edition

77830105, 978-0077830106, 978-0073403182

More Books

Students also viewed these Accounting questions

Question

What are four different kinds of presentation openers you can use?

Answered: 1 week ago