How much will it cost company to pay off debt at time

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As a financial manager, you need to raise capital for your company. Your bank will not give you the terms needed to initiate a project. You need to raise $10,000,000.00 and don't want to pay more than 6% annual interest (paid bi-annually) so you decide to issue bonds (face value of $1,000 each) that mature in 20 years. Five years later, your company's project has done much better than expected and would like to re-purchase the bonds on the secondary market in an attempt to pay off the debt early. During this time interest rates have fallen from 6% to 4%. How much will it cost the company to pay off their debt at this time?

Amount 10000000
Face value 1000
No of bonds 10000
Time 20
Coupon  6%
Interest rate 6%


Time left 15
Interest rate 4%
Value per bond  $ 1,223.96
Cost  $ 12,239,645.56

Reference no: EM13855124

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