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The Acton-Boxborough School District will issue a 30-year bond with a face value of $ 5,000,000...

The Acton-Boxborough School District will issue a 30-year bond with a face value of $ 5,000,000 to construct a new building for the district’s junior high school. The bond has a stated annual interest (coupon rate) of 5 percent, and the district will make interest (coupon) payments based on the stated interest rate twice a year.

a) What is the semiannual interest (coupon) payment? (semiannual = every six months)

b) How much will the school district receive from the bond offering under the following conditions:

a. Market interest rates increase to 8% at the time of the offering. (Assuming interests are compounded semiannually).

b. Market interest rates decrease to 5% at the time of offering. (Assuming interests are compounded semiannually).

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ekkarill92 answered 2 years ago
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