Semiannual payment bonds with the same risk (Aaa) and maturity (20 years) as your company’s bonds have a nominal (not EAR) yield to maturity of 9 percent. Your company’s treasurer is thinking of issuing at par some $1,000 par value, 20-year, quarterly payment bonds. She has asked you to determine what quarterly interest payment, in dollars, the company would have to set in order to provide the same effective annual rate (EAR) as those on the 20-year, semiannual payment bonds. What would the quarterly, dollar interest payment be?
Semiannual payment bonds with the same risk (Aaa) and maturity (20 years) as your company’s bonds have a nominal (not EAR) yield to maturity of 9 percent. Your company’s treasurer is thinking of issuing at par some $1,000 par value, 20-year, quarterly payment bonds. She has asked you to determine what quarterly interest payment, in dollars, the company would have to set in order to provide the same effective annual rate (EAR) as those on the 20-year, semiannual payment bonds. What would the quarterly, dollar interest payment be?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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124. Semiannual payment bonds with the same risk (Aaa) and maturity (20
years) as your company’s bonds have a nominal (not EAR) yield to
maturity of 9 percent. Your company’s treasurer is thinking of issuing
at par some $1,000 par value, 20-year, quarterly payment bonds. She has
asked you to determine what quarterly interest payment, in dollars, the
company would have to set in order to provide the same effective annual
rate (EAR) as those on the 20-year, semiannual payment bonds. What
would the quarterly, dollar interest payment be?
a. $45.00
b. $25.00
c. $22.25
d. $27.50
e. $23.00
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