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Plz explain clearly becoz I have no idea about the rules used here and actually how to solve these parts!
You will have to be more specific as to which parts of the answer you are not clear about.
I assume that you are happy with what is mean by the various ratios that are required?
(If not, then I do suggest that you watch my free lectures. Our lectures are a complete free course for Paper F9 and cover everything needed to be able to pass the exam well.)
Which lecture talkes about buy back bond??
Why we take 90 multiply 100 over 112.50
Better ,, list Steps on how to answer part b ?????
Good heavens! Buying back a bond means exactly what is says – the company owes money and therefore pays interest on the bonds. If they buy the bonds from the holders of them then the debt no longer exists and they do not have to continue to pay the interest.
Obviously they pay the market value for the bonds which is $112.50 for every $100 nominal/par value.
The question tells you exactly what they are doing.So 90M will buy 90M/112.50 bonds and the total nominal value of them (on which the 8% interest is payable) is therefore 90M/112.50 x 100.
Do not tell me to list steps – the steps are all in the examiners answer, and our lectures explain everything you need to know about bonds. They are a complete course and you should watch them in order.
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