Assume you are the cfo of publicly traded corporation

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Reference no: EM131965289

The questions below are all based on the following assumptions:

1. Assume you are the CFO of a publicly traded corporation

2. Assume you are seeking to borrow and/or raise some money

3. Assume you have two options:

Option A: Sign with a bank for a 30-yr $100,000 bank loan at 3% APR

Option B: Issue a 30-yr $100,000 bond with a 3% coupon rate

Question 1) Which of the two options has the higher duration?

Question 2) In which of the options would you pay more interest over the full 30 years?

Question 3) Assuming that you knew interest rates were going to increase in the future, which of the two options would provide you with more free cash flow and flexibility to re-invest at the higher interest rate over the first 20 years?

Reference no: EM131965289

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