Sepia Inc. issued bonds for $500,000 that were redeemable in 8 years. They established a sinking fund that was earning 5.75% compounded semi-annually to pay back the principal of the bonds on maturity. Deposits were being made to the fund at the end of every 6 months.
a. Calculate the size of the periodic sinking fund deposit.
b. Calculate the sinking fund balance at the end of the payment period 10.
c. Calculate the interest earned in payment period 11.
d. Calculate the amount by which the sinking fund increased in payment period 11.
Please refer to below spreadsheet for calculation and answer. Cell reference also provided.
Cell reference -
Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.
Sepia Inc. issued bonds for $500,000 that were redeemable in 8 years. They established a sinking...
Sepia Inc. issued bonds for $350,000 that were redeemable in 9 years. They established a sinking fund that was earning 4.49% compounded semi-annually to pay back the principal of the bonds on maturity. Deposits were being made to the fund at the end of every 6 months. a. Calculate the size of the periodic sinking fund deposit. $0.00 Round your answer up to the next cent b. Calculate the sinking fund balance at the end of the payment period 12....
Math of Finance A company wanted to raise $100, 000 and issued twenty, $5000 bonds paying a 10% coupon rate payable semi-annually for 5 years. It set up a sinking fund to repay the debt at the end of 5 years and made deposits at the end of every six months into the fund. The sinking fund was earning 6.5% compounded semi-annually. (a) calculate the periodic cost of the debt (b) calculate the book value of the debt after 3...
A sinking fund is established to discharge a debt of $50,000 in 25 years. If deposits are made at the end of each 6-month period and interest is paid at the rate of 4%, compounded semiannually, what is the amount of each deposit? (Round your answer to the nearest cent.)
1) Carlos has borrowed $8,000 for 8 years at 6% compounded semi-annually. He will repay interest every 6 months plus principal at maturity. He will also deposit X every 6 months into a sinking fund paying 5% compounded semi-annually to pay off the principal at maturity. a) Find X. Carlos goes bankrupt at the end of year 6, just after making his interest payment and sinking fund deposit. The bank confiscates the money in the sinking fund but gets no...
A company can borrow $760000 for 7 years by issuing bonds, on which interest is paid semi-annually at j2 = 11% and the principal is paid off using a sinking fund earning j2= 2%. The other option is to borrow $760000 from a bank and repay the loan over 7 years with equal semi-annual payments at j2 = 12%. Which option will result in a smaller periodic cost for the company? Bank loan or Sinking fund method How much will...
A sinking fund amounting to $16,000 is to be created by making payments at the beginning of every 6 months for 5 years. Interest earned by the fund is 9.6% compounded semi-annually. Determine the size of the periodic payment and compute the interest earned during the fourth payment interval. Verify your answer by checking the sinking fund schedule. The size of the payment is $nothing. (Round the final answer to the nearest cent as needed. Round all intermediate values to...
A sinking fund amounting to $21,000 is to be created by making payments at the beginning of every 6 months for 8 years. Interest earned by the fund is 85% compounded semi-annually. Determine the size of the periodic payment and compute the interest eamed during the fifth payment interval. Verify your answer by checking the sinking fund schedule The size of the payment is $ (Round the final answer to the nearest cent as needed. Round all intermediate values to...
Instruction: Fill in the blanks. Do not use thousand separator, use 2 decimal places only (i.e. 1000.00 instead of 1,000). MAM Trading established a sinking fund in order to accumulate Php50,000 by depositing equal amounts of money at the end of every year for 3 years. If the fund was earning interest at 10% compounded annually, construct a sinking fund schedule to illustrate details of the fund. FV Ir 50000.00 10% period Payment | Payment Schedule Interest Earned Increase in...
When the market rate of interest was at an annual rate of 12%, King company issued $5,000,000, 10-year, 11% bonds payable. The interest on the bonds is to be paid semi-annually. 1. Calculate the selling price of the bonds 2. Calculate the interest expense for the first period using the effective interest method 3. Calculate the interest expense for the first period using the straight line method As additional security for the bondholders, King has agreed to make ten annual...
ABC Inc issues $500,000 of 11% bonds that are due in 10 years. These bonds pay interest on a semi- annually basis. At the time of issue, the market rate for such bonds were 10%. Please calculate the bonds’ issue price. Excel spreadsheet function to be used.