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Determining the market interest rate

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Reference no: EM133081098

A municipality needs to procure funds for a roadway project that has an initial cost of $30M and operating and maintenance costs of $1M that will increase 2% a year with a 20 yr lifetime. The county is going to issue 20-yr bonds with $10,000 face values and a coupon rate of 4% (paid annually). The market interest rate is estimated to be 5% over the project's time horizon.

How many bonds must they issue if they want to cover their entire (present worth) project costs?

How much interest will the municipality pay each year for these bonds? Round your answer to the nearest dollar and enter it without commas.

Reference no: EM133081098

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