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What face value of bonds must tsla sell to raise

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Tesla wants to raise $120 million to build a new factory. for this, they issue a bond paying 14% maturing in 12 years. To guarantee that they will be able to repay the principal at maturity, the investors require TSLA to make annual deposits into a sinking fund that pays 2.95% (effective annual rate) that will grow to match the face value at maturity. The current interest rate is 3.95% compounded quarterly.

a) What face value of bonds must TSLA sell to raise their target amount?

b) How much must they deposit each year into the sinking fund?

c) After 6 years how much money is in the sinking fund?

After 6 years, both the current interest rate and the sinking fund rate change by 1%.

d) What is the value of the bonds after this rate change?

e) What should TSLA change their payment to, so that they will still have exactly $120 in the sinking fund when the bond matures?

Reference no: EM132607590

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