CEE 3311 - CONSTRUCTION ENGINEERING HOMEWORK\#5 - PROJECT FUNDING (BOND EINANCING) 12.4 Suppose that for the multipurpose sports stadium example considered in the text, the bond issue was for 40 years and the annual interest rate is 9% of the bond principal. Using the architect's estimate of cost of $41 million, determine the effective interest rate. HINTS: Use stadium project example in the textbook with the same Bond Financing setup; except Bond Payback Period =40 years Annual Interest Rate =9% (a) Draw the Cash Flow Diagram of Revenue-Expense for a bond issue. (b) Use interest table posted on Canvas to find Present Worth (PW) of Annual Interest Amounts and PW of future Bond Payback Amount. (c) Equate PW (Initial money from Lender, P) = PW (Annual Interest, A + Payback of money borrowed plus fee, F) (d) Use trial and error method, to determine the effective interest rate, i.e., Select different interest rates and calculate the PW equation to see what interest rate will balance the PW equation. CEE 3311 - CONSTRUCTION ENGINEERING HOMEWORK\#5 - PROJECT FUNDING (BOND EINANCING) 12.4 Suppose that for the multipurpose sports stadium example considered in the text, the bond issue was for 40 years and the annual interest rate is 9% of the bond principal. Using the architect's estimate of cost of $41 million, determine the effective interest rate. HINTS: Use stadium project example in the textbook with the same Bond Financing setup; except Bond Payback Period =40 years Annual Interest Rate =9% (a) Draw the Cash Flow Diagram of Revenue-Expense for a bond issue. (b) Use interest table posted on Canvas to find Present Worth (PW) of Annual Interest Amounts and PW of future Bond Payback Amount. (c) Equate PW (Initial money from Lender, P) = PW (Annual Interest, A + Payback of money borrowed plus fee, F) (d) Use trial and error method, to determine the effective interest rate, i.e., Select different interest rates and calculate the PW equation to see what interest rate will balance the PW equation