1. Tea & Coffee Place spent $10,000 to refurbish its current facility. The firm borrowed 60 percent  of the refurbishment cost...

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1. Tea & Coffee Place spent $10,000 to refurbish its current facility. The firm borrowed 60 percent 
of the refurbishment cost at 8.0% percent interest for 3 years and the loan calls for three equal 
annual payments. Prepare the amortization schedule for the three year loan. How much total 
interest is paid in 3 years? 
 
2. RG Builders issued a $1,000 par value bond that pays a 9 percent interest annually. The bond 
matures in 14 years and is currently selling at $1,120. Your required rate of return is 8.5 percent.
a. Compute the bond’s expected rate of return.
b. Determine the value of the bond to you, given your required rate of return.
c. Should you purchase the bond? Why?

 

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