Question
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, 2022, and the interest will be paid on June 1st of the following years. The bonds mature as follows:
The City received three competing bids offers for the Waste Water Revenue Bonds. The three offers are as follows:
From Rogue Securities: -The City receives $4.2 million dollars -The Interest Rates for the serial bonds with maturities: 2027 through 2030, 3.33 percent 2031 through 2037, 4.00 percent
From Johnson-Miller: -The City Receives $4.5 million dollars -The Interest Rates for the serial bonds with maturities: 2027 through 2029, 2.75 percent 2030 through 2034, 3.28 percent 2035 through 2037, 4.50 percent
From Shostak Corp: -The City receives $4.55 million dollars -The Interest rates for the serial bonds with maturities: 2027 to 2033, 3.45 percent 2034 to 2037, 4.25 percent
For each bid, compute the net interest cost (NIC) and the true interest cost (TIC). Which bid is more advantageous for the city?
Please show excel calculations, explanations, and interpretation.
\begin{tabular}{|l|l|} \hline Maturity Date & Amount ($) \\ \hline 6/1/2027 & 150,000 \\ \hline 6/1/2028 & 200,000 \\ \hline 6/1/2029 & 200,000 \\ \hline 6/1/2030 & 250,000 \\ \hline 6/1/2031 & 300,000 \\ \hline 6/1/2032 & 300,000 \\ \hline 6/1/2033 & 350,000 \\ \hline 6/1/2034 & 450,000 \\ \hline 6/1/2035 & 500,000 \\ \hline 6/1/2036 & 800,000 \\ \hline 6/1/2037 & 1,000,000 \\ \hline \end{tabular} \begin{tabular}{|l|l|} \hline Maturity Date & Amount ($) \\ \hline 6/1/2027 & 150,000 \\ \hline 6/1/2028 & 200,000 \\ \hline 6/1/2029 & 200,000 \\ \hline 6/1/2030 & 250,000 \\ \hline 6/1/2031 & 300,000 \\ \hline 6/1/2032 & 300,000 \\ \hline 6/1/2033 & 350,000 \\ \hline 6/1/2034 & 450,000 \\ \hline 6/1/2035 & 500,000 \\ \hline 6/1/2036 & 800,000 \\ \hline 6/1/2037 & 1,000,000 \\ \hline \end{tabular}Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started