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Assume that Austin Water purchases surface water from the Lower Colorado River Authority at a cost of $120,000 per month in the months of February
Assume that Austin Water purchases surface water from the Lower Colorado River Authority at a cost of $120,000 per month in the months of February through September. Instead of paying monthly, the utility makes a single payment of $800,000 at the end of the year (i.e., end of December) for the water it used. The delayed payment essentially represents a subsidy by the Authority to the water utility. At an interest rate of 3% per year compounded monthly, what is the amount of the subsidy? (3 Points)
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