Case 3. The following questions are not related.
Requirements
1. Duncan Brooks Co. needs to borrow $500,000 to open new stores. Brooks can borrow $500,000 by issuing 5%, 10-year bonds at a price of 96. How much will Brooks actually be borrowing under this arrangement? How much must Brooks pay back at maturity? How will Brooks account for the difference between the amount borrowed and the amount paid back?
2. Brooks prefers to borrow for longer periods when interest rates are low and for shorter Periods when Interest rates are high. Why is this a good business strategy? (Challenge)
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