Your brother's company has three debts: $7 million in month #5; $8 million in month #12; and $11 million in month #17. You want to pay all debts with two identical payments, one in month #7 and one in month #19. Use a focal date in month #16, a market interest rate of 19% effective annual interest, and a bi-monthly frequency when converting. What is the nominal annual rate convertible bi-monthly that you used? How much is each of the identical payments? Hint: bi-monthly means every 2 months, so the frequency is 6.
Your brother's company has three debts: $7 million in month #5; $8 million in month #12; and $11 million in month #17. You want to pay all debts with two identical payments, one in month #7 and one in month #19. Use a focal date in month #16, a market interest rate of 19% effective annual interest, and a bi-monthly frequency when converting. What is the nominal annual rate convertible bi-monthly that you used? How much is each of the identical payments? Hint: bi-monthly means every 2 months, so the frequency is 6.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Your brother's company has three debts: $7 million in month #5; $8 million in month #12; and $11 million in month #17. You want to pay all debts with two identical payments, one in month #7 and one in month #19. Use a focal date in month #16, a market interest rate of 19% effective annual interest, and a bi-monthly frequency when converting. What is the nominal annual rate convertible bi-monthly that you used? How much is each of the identical payments?
Hint: bi-monthly means every 2 months, so the frequency is 6.
Expert Solution
Given,
Month 5 = Debt $7 million
Month 12 = Debt $8 million
Month 17 = Debt $11 million
Effective annual interest = 19%
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Solved in 3 steps with 2 images
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