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Question - To finance the construction of an engineering and technology center building, a school has decided to issue a total of 10,000 coupon bonds each with a face value of $10,000 with an 8% coupon rate. The Vice President for finance received approval from the board of regents to issue the bond. Bond holders will receive quarterly payments of their bonds which matures in 10 years. Due to market conditions, the school forecast that they will enter the bond market at the time when the nominal interest rate has changed from 8% to 10% per year.
How much will the school raise from the bond sale?
If the school decides to buy all the bonds back six years after the issue date for $72,000,000, what will be the effective interest rate they will pay to the bond holders?
Janice of the college of Engineering has decided to invest in this bond to support her living expenses. Her plan is to buy 10 of these bonds when they are issued. She will keep them for 5 years and hope to sell them at $12,000 a piece.
Calculate the IRR for Janice if all her assumptions hold.
Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest. How much control does the Fed have over this longer real rate?
Coures:- Fundamental Accounting Principles: - Explain the goals and uses of special journals.
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Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of which require semiannual interest payments.
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