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To raise $5,000,000 to expand into new markets, a very successful laptop manufacturing company issued...

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Finance

To raise $5,000,000 to expand into new markets, a very successful laptop manufacturing company issued bonds with a coupon rate of 4.75% compounded semi-annually, paying interest every 6 months, and redeemable in 16 years. They established a sinking fund to retire this debt on maturity and made equal deposits into the fund at the end of every 6 months.

a. If the fund was earning 4.00% compounded semi-annually, calculate the periodic cost of the debt.

b. Calculate the book value of the debt at the end of 12 years.

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