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Economics

A firm plan to borrow $900 via issuing debt instruments. The firm can issue a simple loan, a fixed-payment loan or a coupon bond.

(1) If the interest rate is fixed at 8%, the face value of the coupon bond is $1000 and the fixed-payment loan has 5 payments. Carefully specify the cash flow schedule of the three potential instruments with the maturity of 5 years.

(2) With the same settings as that in (1), carefully specify the cash flow schedule of the three potential instruments with the maturity of 10 years.

(3) From the lenders' view, among all six instruments from both (1) and (2), which one is more attractive?

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91385565

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