1. Milford Public Sound incurs an average expenditure over the construction period of an outdoor arena complex of K15,000,000. It has taken out a short-term loan of K12,000,000 at 9% interest specifically to cover the cost of this project. Milford can capitalize the interest cost of the entire amount of the K12,000,000 loan at 9% interest, but it still has K3,000,000 of average expenditures that exceed the amount of this project-specific loan.

Milford has two bonds outstanding at the time of the project, in the following amounts:

BOND DESCRIPTION	PRINCIPAL OUSTANDING	INTEREST
8% Bond	18,000,000	K1,440,000
10% Bond	12,000,000	1,200,000
Totals	K30,000,000	K2,640,000

Required:

1. Calculate the weighted average interest rate.
2. Describe the significance of bonds in investment funding.