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1) Many creditors of firm offer early payment discounts. Accounts payable supervisor doesn’t believe in paying early “as bank overdraft rate of 7% pa is more than average 2% offered for payment in 12 days from date of invoice”. Supervisor stretches accounts to 40 days from last date of early payment discount. If the average creditor’s terms are 2%, 12: net 30, determine the minimum number of days beyond the net date which accounts should be stretched to make stretching a viable alternative?

2) Highcorp Treasury company in land of Zanadu is holding the parcel of Zanadu Government Bonds with the face value of= $2,000,000. Bonds were issued seven and a half years ago and still have two and a half years to maturity. They pay the coupon rate of interest of= 6.5% pa, with interest being paid semi-annually. At present market yield quoted for Zanadu bonds is= 4.22% pa. Convention in Zanadu financial markets is that market yield and coupon rate are cited as annual nominal rates. Determine the market value of bonds?

Basic Finance, Finance

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