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7.3 - Problem Set

7.3 - Problem Set

Q FINE 332 Corporate Finance I Module 7 Problem Set Long Term Debt Please use the template provided to complete Problem Set 7. It contains all the questions and the data that you need. FINE 332 | Jan ’22 | worldwide.erau.edu All rights are reserved. The material contained herein is the copyright property of Embry -Riddle Aeronautical University, Daytona Beach, Florida, 32114. No part of this material may be reproduced, stored in a retrieval system, or transmitted in any form, electronic, mechanical, photocopying, recording or otherwise without the prior written consent of the University.

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1. A firm issues a $300 million debt obligation that pays 4.5% per year over 30 years. How much will it have to pay at the end? PV 300,000,000.00 Rate 4.50% Maturity (yrs.) 30.0 FV $1,123,595,440.36 2. Suppose that a life insurance company has guaranteed a payment of $22 million to a pension fund 15 years from now. If the life insurance company receives a premium of $10.4 million from the pension fund and can invest the entire premium for 15 years at an annual interest rate of 4.25%, will it have sufficient funds from this investment to meet the obligation? PV 10,400,000.00 Rate 4.25% Maturity (yrs.) 15.0 FV 22,000,000.00 Amount required $19,416,649.63 Over/(Under) (2,583,350.37)1. A firm issues a $300 million debt obligation that pays 4.5% per year over 30 years. How much will it have to pay at the end? PV 300,000,000.00 Rate 4.50% Maturity (yrs.) 30.0 FV $1,123,595,440.36 2. Suppose that a life insurance company has guaranteed a payment of $22 million to a pension fund 15 years from now. If the life insurance company receives a premium of $10.4 million from the pension fund and can invest the entire premium for 15 years at an annual interest rate of 4.25%, will it have sufficient funds from this investment to meet the obligation? PV 10,400,000.00 Rate 4.25% Maturity (yrs.) 15.0 FV 22,000,000.00 Amount required $19,416,649.63 Over/(Under) (2,583,350.37)