Achieve investment objective

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Ivonne wants to issue and sell a coupon bond in order to borrow money to expand her online consulting business. After going over her past profit figures, she comes to the conclusion that she can pay back the loan in five annual installments (coupons) of $25,000 each. The coupon payments will start one year after the issuance of the bond (like the one in the previous question). She decides not to offer any final payment. She checks the financial websites and finds out that the interest rate on her kind of bonds is 15 percent. She then realizes that at such a high interest rate she can only borrow ___dollars, not enough to achieve her investment objective.

In the afternoon she learns that the interest rate has dropped to only 5 percent. She calculates that at that interest rate she can sell her bond for ___dollars, which will be sufficient to pay for the investment project.

Reference no: EM132343969

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