What is the semi-annual interest payment

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Question - The Harrow Board of Education financed the acquisition of a building site through a $300,000 long-term promissory note due in 15 years.

Interest on the promissory note is 9.25% compounded semi-annually and is payable at the end of every six months.

To provide for the redemption of the note, the Board agreed to make equal payments at the end of every six months into a sinking fund paying 8% compounded semi-annually.

a. What is the semi-annual interest payment?

b. What is the size of the semi-annual payment into the sinking fund?

c. What is the annual cost of the debt?

d. Compute the book value of the debt after 5 years.

e. Compute the increase in the sinking fund in the 20th payment interval.

Reference no: EM133032409

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