Theoriginalsemiannualcoupon10m735000000

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Unformatted text preview: anding, the amount required to call the issue is $10,850,000. Should they call the original bonds and re‐issue at 6%? The original semi‐annual coupon ($10m @ 7%): $350,000.00 New semi‐annual coupon ($10.85m @ 6%): $325,500 Semi‐annual savings: $24,500 But, additional $850,000 will have to be repaid in 2025 (17 years from now). PV of extra‐cost = $850,000/1.0334 = $311,138.16 PV of savings: N = 34 I/Y = 3 PMT = ‐24,500 FV = 0 CPT PV = 517,730.00 PV‐savings – PV‐costs = $517,730.00 ‐ $...
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