How much money would the city receive from this nominal

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Reference no: EM131962545

A city wanting to repave some local city streets needed to raise $3, 000,000 through a bond issue. At the time the bond issue was approved by the voters, the competitive (market) bond interest rate was at 5%. Thus, 3,000 bonds, each with a 5% coupon rate (payable annually), a face value of $1, 000, and a maturity date of 20 years hence were printed for sale. Unfortunately, between the time the bonds were approved and printed, and the time they were sold, the effective annual interest rate the market required to attract investors to this sort of bond changed from 5% to 6% (that is, bond purchasers require an effective 6% per year). How much money would the city receive from this nominal $3, 000, 000 issue.

Reference no: EM131962545

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