The municipality of Duncan has financed a sewage treatment plant by issuing $18 million worth of sinking fund debentures. The debentures have a 15-year term and pay a coupon rate of 9% compounded semiannually. Rounding the sinking fund payments, interest payments, and periodic interest earnings to the nearest dollar,
a. What equal payments at the end of every six months will be necessary to accumulate $18 million after 15 years if the sinking fund can earn 6.25% compounded semiannually?
b. What is the annual cost of the debt to Duncan taxpayers?
c. Construct a partial sinking fund schedule (including the book value of the debt) showing details of the first three and the last three payments.