Homework Answers
Solution:
Principal to be repaid = $4,825,000
Semi annual interest payment = $4825000*6%*6/12 = $144,750
n = 5* 2 = 10 periods
i = 4%/ 2 = 2% semi annual
Proceeds from bond issue = $4,825,000* PV of Single sum for 10 periods @2% + $144750* PV of an ordinary annuity for 10 periods @2%
= $4825000*0.82035 + $144750*8.98259
= $5,258,419
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