Sign In
Not register? Register Now!
Essay Available:
Pages:
2 pages/≈550 words
Sources:
No Sources
Style:
Other
Subject:
Mathematics & Economics
Type:
Math Problem
Language:
English (U.S.)
Document:
MS Word
Date:
Total cost:
$ 9.72
Topic:

Finance Course Work

Math Problem Instructions:
  1. What annual coupon rates would Carem have to pay in order to issue 10-year par value bonds and receive proceeds of $2 million?
  2. What would be the impact on Carem’s funding plans if it included a call feature in the bond, effective five years from date of issue.  The call price would be 110% of par value.  What would be the benefits of including the call feature?

 

Math Problem Sample Content Preview:

Finance Course Work
Name
Institution
Professor
November 8, 2015
What annual coupon rates would Carem have to pay in order to issue 10-year par value bonds and receive proceeds of $2 million?
Value of the bond = Present value of the annual coupon interest + Present value of the principal amount after 10 years
Value of the bond = PVAF r% 10 years (Interest) + PVIF r% Year 10 (Principal)
Using the YTM rate of 11% for 10 years
Value of the bond = PVAF 11% 10 years (Interest) + PVIF 11% Year 10 (2,000,000)
From the Annuity tables:
PVAF 11% 10 years = 5.8892
PVIF 11% Year 10 = 0.3522
Current value of the bond = 2,000,000
Current value of the bond = 5.8892 (Interest) + (0.3522 x 2,000,000)
2,000,000 = 5.8892 (Interest) + 704400
5.8892 (Interest) = 1295600
Annual Coupon Interest rate = 215998.13 p.a
Annual Coupon % rate = 215998.13/2000000 x 100 = 10.8...
Updated on
Get the Whole Paper!
Not exactly what you need?
Do you need a custom essay? Order right now:
Order

👀 Other Visitors are Viewing These Other Math Problem Samples:

HIRE A WRITER FROM $11.95 / PAGE
ORDER WITH 15% DISCOUNT!
Order Now