Economics Bonds Problem Please HELP!!
I was given this problem but I have no idea what the correct approach is
A $2million school-bond issue bearing interest at 15 percent payable annually and maturing in 25 years was sold at a price with a 20 percent annual rate of return to the investors. The brokerage fee for handling the sale was 0.3 percent of the total bond issue. What amount was realized from the sale to actually use school construction?
Approach 1
FV=2m-2m x0.003=$1,994,000
PW_Bond=1,994,000(P⁄F,20%,25)+1,994,000(.15)(P⁄A,20%,25)
PW_Bond=1,994,000(0.0105)+1,994,000(.15)(4.9476)
PW_Bond=$1,500,764.16
Approach 2
PW_Bond=2m(P⁄F,20%,25)+2m(.15)(P⁄A,20%,25)
PW_Bond=2m(0.0105)+2m(.15)(4.9476)
PW_Bond=$1,505,280
P= 1,505,280-1,505,280x0.003
P=1,504,964.16
A $2million school-bond issue bearing interest at 15 percent payable annually and maturing in 25 years was sold at a price with a 20 percent annual rate of return to the investors. The brokerage fee for handling the sale was 0.3 percent of the total bond issue. What amount was realized from the sale to actually use school construction?
Approach 1
FV=2m-2m x0.003=$1,994,000
PW_Bond=1,994,000(P⁄F,20%,25)+1,994,000(.15)(P⁄A,20%,25)
PW_Bond=1,994,000(0.0105)+1,994,000(.15)(4.9476)
PW_Bond=$1,500,764.16
Approach 2
PW_Bond=2m(P⁄F,20%,25)+2m(.15)(P⁄A,20%,25)
PW_Bond=2m(0.0105)+2m(.15)(4.9476)
PW_Bond=$1,505,280
P= 1,505,280-1,505,280x0.003
P=1,504,964.16
Original post by MIAMARI
...
You might do better in the "Accounting and Finance" or "Economics" subforums. Both accessible from here.
They're not as active as the maths forum, but do stand a better chance of getting a useful response.
I don't usually recommend posting on multiple forums, but it might be the best course of action in this case.
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