Question
Charleston Independent School District needs to raise $200 millionto refurbish the existing schools and build new ones. Thebonds will pay interest semiannually at a rate of 7% per year, andthey will mature in 30 years. Brokerage fees associatedwith the sale of the bonds will be $1 million. If theinterest rate in the marketplace rises to 8% per year, compoundedsemiannually, before the bonds are issued, what will the face valueof the bonds have to be for the school district to net $200million? even if you can set up the solution, it would be great any help would be great, i will rate lifesaver even if youjust set up the solution even if you can set up the solution, it would be great any help would be great, i will rate lifesaver even if youjust set up the solution
Explanation / Answer
The problem can be followed using the following steps: 1 Calculate the present value of a single sum of $200million discounted at the market rate of interest of 8% p.a , where n=30 2 Calculate the present value of annuity of interestpayments of $14million discounted at the market rate of interest Here , n= 60 & rate of interest = 8% / 2=4% 3 Obtain the sum of 1 & 2 calculatedabove. 4 Add $1 million to the figure obtained in3 All The Best ! The problem can be followed using the following steps: 1 Calculate the present value of a single sum of $200million discounted at the market rate of interest of 8% p.a , where n=30 2 Calculate the present value of annuity of interestpayments of $14million discounted at the market rate of interest Here , n= 60 & rate of interest = 8% / 2=4% 3 Obtain the sum of 1 & 2 calculatedabove. 4 Add $1 million to the figure obtained in3