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1. Columbus, Ohio advertised for bids for the purchase of $4.5 million principal amount of Waste Water Revenue Bonds. Bonds will be delivered on June

1. Columbus, Ohio advertised for bids for the purchase of $4.5 million principal amount of Waste Water Revenue Bonds. Bonds will be delivered on June 1, 2024, and the interest will be paid on June 1st of the following years. The bonds mature as follows:

The City received three competing bids for the Waste Water Revenue Bonds. The three offers are as follows:

From Lucy Securities:

  • The City receives $4.35 million dollars
  • The Interest Rates for the serial bonds with maturities: o 2029 through 2031, 3.25 percent
  • o 2032 through 2039, 4.0 percent

From Lily Incorporated:

  • The City Receives $4.5 million dollars
  • The Interest Rates for the serial bonds with maturities: o 2029 through 2030, 2.75 percent
  • o 2031 through 2034, 3.0 percent
  • o 2035 through 2039, 4.55 percent

From Shostak Corp:

  • The City receives $4.55 million dollars
  • The Interest rates for the serial bonds with maturities: o 2029 to 2033, 3.1 percent
  • o 2034 to 2039, 4.35 percent

For each bid, compute the net interest cost (NIC) and the true interest cost (TIC). Which bid is more advantageous for the city?

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