SOLUTION: A major shipping company is planning to purchase new cargo ships. It wants to borrow $1100 million by issuing bonds. The bonds are for a 15-year period with at a rate of 9 percent

Question 1164760: A major shipping company is planning to purchase new cargo ships. It wants to borrow $1100 million by issuing bonds. The bonds are for a 15-year period with at a rate of 9 percent per year compounded quarterly. Interest is to be paid each quarter to bondholders. How much will the company have to pay in quarterly interest? How much interest will it pay over the 12-year period?
Answer by solver91311(24713) (Show Source): You can put this solution on YOUR website!

You have your terminology wrong. You cannot compound interest unless the interest paid by the borrower is allowed to remain in the account so that interest accrues against the interest paid. So if the interest goes to the bondholders each quarter, then the interest paid is simple interest, not compound interest. So 0.09 per year is 0.025 per quarter. So 1100 X 10^6 times 0.025 gets paid each quarter, and 4 times 15 is 60, so 60 times the quarterly amount is the total over the 15 years.

John

My calculator said it, I believe it, that settles it

RELATED QUESTIONS
Samantha wants to purchase a new dress. She can buy it online for 15% off but she will... (answered by josmiceli)

website ads Nielson's net ratings for the month of December 2002 indicated that in... (answered by ikleyn)

Ok this is something related to my export business which ships to China. Here’s the... (answered by jim_thompson5910)

A city government has approved the construction of a $800 million sports arena. Up to... (answered by Theo)

An employee at a major corporation has $2,000 to invest in her 401K. She wants to invest... (answered by MathTherapy)

Semiannual payment bonds with the same risk (Aaa) and maturity (20 years) as your... (answered by solver91311)

A cargo ship has a stack of shipping containers. the stack is x containes high and x... (answered by fractalier)

The Company A has recently signed a purchase agreement with company B to acquire 100... (answered by ikleyn)

If campbell were to purchase a new warehouse for 1.1 million and finance it entirely with (answered by Alan3354)