Metro city needs 200000000 to build a light-rail system the

Assignment Help Accounting Basics

Reference no: EM13569386

Metro city needs $200,000,000 to build a light-rail system. The city's financial advisors believe that it will be able to borrow money by issuing a 30year bond with an annual coupon rate of 4.8% that pays interest every 6 months. However, interests rates have been very volatile over the last year ranging from 4.6% to 5.1% for borrowers with Metro's credit rating.

As a result, metro's town manager is concerned. If rates rise while the offering is in registration, metro will not get the $200 million it needs from the sale of its bonds. To make sure they will be able to raise enough money, Metro's financial advisors have recommended that Metro register a total of $250million worth of bonds. in the event that rates rise above 4.8% , metro will sell enough additional bonds to get the $200million they need for the rail system.

) if rates rise to 4.95% on the day the bonds are sold, how much would metro receive from the sale of $200million worth of bonds?

2) what is the par value of the additional bonds that metro must sell to raise the required $200million.

Reference no: EM13569386

Questions Cloud

Snow cleaners inc had net income of 494592 for its fiscal : snow cleaners inc had net income of 494592 for its fiscal year ended november 30 2012. during the year the company had

Justify your investigation by evaluating it in terms of its : justify your investigation by evaluating it in terms of its effectiveness and explain how it could be further improved.

Stangle company manufactures ties when 28000 ties are : stangle company manufactures ties. when 28000 ties are produced the costs per unit are direct materials 0.60 direct

Orkin company is considering two different mutually : orkin company is considering two different mutually exclusive capital expenditure proposals. project a will cost 489272

Metro city needs 200000000 to build a light-rail system the : metro city needs 200000000 to build a light-rail system. the citys financial advisors believe that it will be able to

A financial adviser claims that a particular stock earned : a financial adviser claims that a particular stock earned a total return of 10 last year. during the year the stock

Beacon company is considering two different mutually : beacon company is considering two different mutually exclusive capital expenditure proposals. project a will cost

What do the characters say with their dress gestures facial : what do the characters say with their dress gestures facial expressions and the like? do the same with a television

If you were to get a physical from your doctor and he or : if you were to get a physical from your doctor and he or she only took your blood pressure prior to stating that you

User Account

All Pages