Calculate price at which institutional investor sold bonds

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Reference no: EM133190061

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Q1. As the finance manager of a small manufacturing business, you are negotiating a fully drawn advance from the local bank, but the board of directors have indicated that they are concerned at the fees being charged by the bank. Explain to the directors the range of fees typically charged, and why the bank charges these fees.

Q2. As the owner of a small architectural firm, you approach the Commonwealth Bank to obtain a term loan so that the firm can buy a new computer-aided drawing machine. The bank offers your company a loan of $28 500 over a three-year period at a rate of interest of 8.65 per cent per annum, payable at the end of each month. Calculate the monthly loan instalment.

Q3. The architectural firm owner in Question 4 also approaches the National Australia Bank to obtain a quote on the loan facility. The competitor bank (NAB) also offers the company a fully drawn advance of $28 500 over a three-year period at a rate of interest of 8.65 per cent per annum, payable in advance at the beginning of each month. Calculate the monthly loan instalment. Explain why the instalment payment is different from the instalment in Question 2.

Q4. After three years of excellent business growth, a local mattress manufacturer decides to expand and purchase new business premises costing $1 250 000. In addition, establishment expenses of 0.50 per cent of the purchase price, plus estimated legal expenses of $15 000 are payable. The total cost to purchase the property will be financed by $225 000 of the firm's own funds plus a mortgage loan from ANZ bank. The bank offers a mortgage loan at 8.15 per cent per annum. The loan will be amortised by monthly instalments over the next 12 years, payable at the end of each month. What is the amount of each monthly instalment?

Q5. On 1 January 2016 a company issued five-year fixed-interest bonds with a face value of $2 million to an institutional investor, paying half-yearly coupons at 8.36 per cent per annum. Coupons are payable on 30 June and 31 December each year until maturity. On 15 August 2017 the holder of the bonds sells at a current yield of 8.84 per cent per annum. Calculate the price at which the institutional investor sold the bonds.

Reference no: EM133190061

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