Homework Answers
Question 1. We assume 15 MID to be 15 million dollars meaning 15,000,000
Case (1)
PV =15,000,000
NPER = 10*2 = 20
RATE = (1+0.12)^(1/2) -1 = 0.0583
So, Semi annual installment =PMT(RATE,NPER,PV) =PMT(0.0583,20,15000000) = $1,289,783.70 = 1.29 MID
Case (2)
PV =15,000,000
NPER = 10*2 = 20
RATE = 0/12.2 = 0.06
So, Semi annual installment =PMT(RATE,NPER,PV) =PMT(0.06,20,15000000) = $1,307,768.35 = 1.31MID
Case (3)
PV =15,000,000
NPER = 10*2 = 20
RATE = ((1+0.12/12)^12 -1)/2 = 0.0634
So, Semi annual installment =PMT(RATE,NPER,PV) =PMT(0.0634,20,15000000) = $1,344,228.69 = 1.34MID
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Date
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Debit
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Year 1
July 1
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Year 2
June 30
Sept. 30
Dec. 31-Note
Dec. 31-Bond
Year 3
June 30
Sept. 30
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