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Suppose That Healdsburg Wants to Buy Back the 7

question 31

Essay

Suppose that Healdsburg wants to buy back the 7.75% notes on December 31, 2013, (i.e., five years early) when the going interest rate is 6%, thereby retiring the $345,154,000 in debt. How much would Healdsburg have to pay for the notes (principal only)?


Definitions:

Simple Interest

Interest calculated only on the principal amount, or the initial sum of money invested or loaned.

Market Rate

The prevailing interest rate available in the marketplace for investments, loans, and deposits.

Simple Interest

Interest calculated only on the principal amount, or the original sum of money lent or invested, without compounding.

Savings Account

A deposit account held at a bank or other financial institution that provides modest interest income.

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