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?