122. GP&L sold $1,000,000 of 12 percent, 30-year, semiannual payment bonds 15 years ago. The bonds are not callable, but they do have a sinking fund that requires GP&L to redeem 5 percent of the original face value of the issue each year ($50,000), beginning in Year 11. To date, 25 percent of the issue has been retired. The company can either call bonds at par for sinking fund purposes or purchase bonds on the open market, spending sufficient money to redeem 5 percent of the original face value each year. If the nominal yield to maturity (15 years remaining) on the bonds is currently 14 percent, what is the least amount of money GP&L must put up to satisfy the sinking fund provision? a. $43,856 b. $50,000 c. $37,500 d. $43,796
122. GP&L sold $1,000,000 of 12 percent, 30-year, semiannual payment bonds 15
years ago. The bonds are not callable, but they do have a sinking fund
that requires GP&L to redeem 5 percent of the original face value of the
issue each year ($50,000), beginning in Year 11. To date, 25 percent of
the issue has been retired. The company can either call bonds at par
for sinking fund purposes or purchase bonds on the open market, spending
sufficient money to redeem 5 percent of the original face value each
year. If the nominal yield to maturity (15 years remaining) on the
bonds is currently 14 percent, what is the least amount of money GP&L
must put up to satisfy the sinking fund provision?
a. $43,856
b. $50,000
c. $37,500
d. $43,796
e. $39,422
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