Answer to Question #249049 in Financial Math for Muskan

Question

Question # 1

A major farming company is planning to purchase new tractors. It wants to borrow $650 million 

by issuing bonds. The bonds are for a 12-year period with simple interest computed quarterly at a 

rate of 10 percent per year. Interest is to be paid each quarter to bondholders. How much will the 

airline have to pay it. quarterly interest? How much interest will it pay in the 12-year period?

Answer 1

The quarterly interest the airline have to pay is:

650×0.1/4 = 16.25 million.

In the 12-year period it will pay:

16.25×4×12 = 780 million.