Compare the effective annual rates of the two notes

Assignment Help Financial Management

Reference no: EM131981774

To help ease a contginuing need for financing, the CFO of E.I. DuPont de Nemours & Company is considered borrowing from insurance companies (private placement). in addition to the public debt markets. She must choose between transactions suggested by two different insurance companies. In both transactions, DePont would receive $10,000,000 upfront in edxchange for a note promosing a single (larger) maturity payment from DEPont in 15 years at a promised interest rte. The 2 options open to DuPont are:

1) A note to Pru-Johntower Life insurance company, promosing an anuual rate of interest of 10%;

2) a note to Tom Paine Mutual Life Insurance Company, promising a rate of interest of 9.72% per year, compounded monthly

Compare the effective annual rates of the two notes; also compare the future required payment that DuPont will make in 15 years under each option.

Reference no: EM131981774

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