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4. A city advertised for bids for the purchase of $2 million principal amount of e Bonds. Bonds will be delivered on April 1, 2007,
4. A city advertised for bids for the purchase of $2 million principal amount of e Bonds. Bonds will be delivered on April 1, 2007, and Sewage Works Revenu interest will be paid on April 1 of the following years. The bonds mature as follows Maturity Date Amount (S) April 1, 2012 April 1, 2013 April 1, 2014 April 1, 2015 April 1, 2016 April 1, 2017 April 1, 2018 April 1, 2019 April 1, 2020 April 1, 2021 April 1, 2022 50,000 50,000 50,000 100,000 100,000 100,000 150,000 150,000 150,000 550,000 550,000 Two bids were received: From Five Points Securities: Pay $2 million The interest rates for each maturity: 2012 through 2020, 5.50 percent 2021 through 2022, 6.25 percent Pay $2 million The interest rates for each maturity 2012 through 2014, 4.19 percent 2015 through 2020, 5.75 percent 2021 through 2022, 6.50 percent From Wellington-Nelson: For each bid, compute the net interest cost (NIC) and the true interest cost (TIC) Which bid is more advantageous to the city? 4. A city advertised for bids for the purchase of $2 million principal amount of e Bonds. Bonds will be delivered on April 1, 2007, and Sewage Works Revenu interest will be paid on April 1 of the following years. The bonds mature as follows Maturity Date Amount (S) April 1, 2012 April 1, 2013 April 1, 2014 April 1, 2015 April 1, 2016 April 1, 2017 April 1, 2018 April 1, 2019 April 1, 2020 April 1, 2021 April 1, 2022 50,000 50,000 50,000 100,000 100,000 100,000 150,000 150,000 150,000 550,000 550,000 Two bids were received: From Five Points Securities: Pay $2 million The interest rates for each maturity: 2012 through 2020, 5.50 percent 2021 through 2022, 6.25 percent Pay $2 million The interest rates for each maturity 2012 through 2014, 4.19 percent 2015 through 2020, 5.75 percent 2021 through 2022, 6.50 percent From Wellington-Nelson: For each bid, compute the net interest cost (NIC) and the true interest cost (TIC) Which bid is more advantageous to the city
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