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The City of Victoria is financing a new $10 million sewage treatment plant through a municipal bond. Bond interest is paid at a rate of
The City of Victoria is financing a new $10 million sewage treatment plant through a municipal bond. Bond interest is paid at a rate of j2=6%. In addition, the City is required to make semi-annual deposits to a sinking fund in order to accumulate enough money to repay the $10 million debt when the bond matures in 20 years. The sinking fund earns j2=4%. a) Calculate the size of the sinking fund deposits rounded to the nearest dollar. b) Calculate the total periodic cost of debt rounded to the nearest dollar (for one period). Clearly label and show your work in your workbook (either formulas or all calculator inputs). Do not put symbols or commas in your answers
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