Project Funding Assignment
It is January 1, 2005. Director of Special Projects Rakesh Parameshwar has a planned $20.5 million project, which will require the following expected cash flows between 2005 and 2009:
Date
Cash Requirement($ millions)
01-Jun-05
7.50
01-Jan-06
4.50
01-Jun-06
1.00
01-Jan-07
01-Jun-07
01-Jan-08
01-Jun-08
01-Jan-09
3.50
Rakesh turns to his Director of Financial Planning, Christine Reyling, and asks her to ensure that funding is available for the project. Christine is considering buying a portfolio of bonds, with cash flows from the bonds arranged to coincide with the needs of Rakesh’s project. The following bonds are available, and can be purchased in any quantity:
Maturity
Coupon
7.00%
7.50%
6.75%
0.00%
10.00%
9.00%
10.25%
Price
1.03
1.02
0.81
1.16
1.15
1.23
1.25
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