A major urban center is planning to issue a $100 million, 20-year, semiannual-interest-paying municipal bond for...
A major urban center is planning to issue a $100 million, 20-year, semiannual-interest-paying municipal bond for the construction of a stadium. The interest rate is 5.875%, based on the economic and financial conditions of the city and city government. The design and issuance costs are estimated to be $10 million and 1%, respectively.
What is the total interest paid if the city decides to adopt a level debt service structure? (please screenshot excel)
Homework Answers
The solution is provided below:
| Size of Issue | 100 | $ million | (1) | ||
| Interest Rate | 5.75% | p.a. | (2) | ||
| Tenure | 40 | years | (3) | ||
| Year | Count | Principal Payment | Interest Payment | Total Payment | |
| (4) | (5) | (6) = -PPMT((2)/2 , (5), (3), (1)) | (7) = -IPMT((2)/2 , (5), (3), (1)) | (8) = (6) + (7) | |
| 0.5 | 1 | $1.36 | $2.88 | $4.24 | |
| 1.0 | 2 | $1.40 | $2.84 | $4.24 | |
| 1.5 | 3 | $1.44 | $2.80 | $4.24 | |
| 2.0 | 4 | $1.49 | $2.75 | $4.24 | |
| 2.5 | 5 | $1.53 | $2.71 | $4.24 | |
| 3.0 | 6 | $1.57 | $2.67 | $4.24 | |
| 3.5 | 7 | $1.62 | $2.62 | $4.24 | |
| 4.0 | 8 | $1.66 | $2.58 | $4.24 | |
| 4.5 | 9 | $1.71 | $2.53 | $4.24 | |
| 5.0 | 10 | $1.76 | $2.48 | $4.24 | |
| 5.5 | 11 | $1.81 | $2.43 | $4.24 | |
| 6.0 | 12 | $1.86 | $2.38 | $4.24 | |
| 6.5 | 13 | $1.92 | $2.32 | $4.24 | |
| 7.0 | 14 | $1.97 | $2.27 | $4.24 | |
| 7.5 | 15 | $2.03 | $2.21 | $4.24 | |
| 8.0 | 16 | $2.09 | $2.15 | $4.24 | |
| 8.5 | 17 | $2.15 | $2.09 | $4.24 | |
| 9.0 | 18 | $2.21 | $2.03 | $4.24 | |
| 9.5 | 19 | $2.27 | $1.97 | $4.24 | |
| 10.0 | 20 | $2.34 | $1.90 | $4.24 | |
| 10.5 | 21 | $2.40 | $1.83 | $4.24 | |
| 11.0 | 22 | $2.47 | $1.77 | $4.24 | |
| 11.5 | 23 | $2.55 | $1.69 | $4.24 | |
| 12.0 | 24 | $2.62 | $1.62 | $4.24 | |
| 12.5 | 25 | $2.69 | $1.55 | $4.24 | |
| 13.0 | 26 | $2.77 | $1.47 | $4.24 | |
| 13.5 | 27 | $2.85 | $1.39 | $4.24 | |
| 14.0 | 28 | $2.93 | $1.31 | $4.24 | |
| 14.5 | 29 | $3.02 | $1.22 | $4.24 | |
| 15.0 | 30 | $3.10 | $1.14 | $4.24 | |
| 15.5 | 31 | $3.19 | $1.05 | $4.24 | |
| 16.0 | 32 | $3.28 | $0.95 | $4.24 | |
| 16.5 | 33 | $3.38 | $0.86 | $4.24 | |
| 17.0 | 34 | $3.48 | $0.76 | $4.24 | |
| 17.5 | 35 | $3.58 | $0.66 | $4.24 | |
| 18.0 | 36 | $3.68 | $0.56 | $4.24 | |
| 18.5 | 37 | $3.78 | $0.45 | $4.24 | |
| 19.0 | 38 | $3.89 | $0.35 | $4.24 | |
| 19.5 | 39 | $4.01 | $0.23 | $4.24 | |
| 20.0 | 40 | $4.12 | $0.12 | $4.24 | |
| TOTAL | $100.00 | $69.57 | $169.57 | ||
Therefore, the total interest paid is $69.57 million. Interest Rate is divided by two because it is a semi-annual interest.
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A major urban center is planning to issue a $100 million,
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A major urban center is planning to issue a $100 million, 20-year, semiannual-interest-paying municipal bond for...
A major urban center is planning to issue a $100 million, 20-year, semiannual-interest-paying municipal bond for the construction of a stadium. The interest rate is 5.875%, based on the economic and financial conditions of the city and city government. The design and issuance costs are estimated to be $10 million and 1%, respectively. How much will the city still owe on this bond at the end of each year? (please screenshot excel spreadsheet of steps)
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