A city is sening a Dona to finance building a new convention center. The bond will be for $100 million, which is the cost of construction of the convention center, at 4.5% annual interest (it is a municipal bond so bond buyers do not pay federal or state income tax on the earnings). The interest payments are to be annual, and the bond matures (principal must be paid back) in 10 years. The city expects that it will average receipt of $11 million in fees from the convention center each year, and will receive $5 million every year in additional hotel tax revenue from people coming to town for events at the center. The asset securing the bond is the convention center. a. How much does the bond pay the investors every year? (this is divided up amongst all the bond buyers) b. What is the total cost of the bond to the city over the 10 years? c. How much money does the city expect to make off the convention center over the 10 years including the costs of paying all the costs of the bond? d. If the city does not pay back the bond at the end of the 10 years, who owns the convention center?

Answer rating: 100% (QA)

Answers to your questions a Annual Interest Payment Interest rate 45 Bond value 100 million Annual i... View the full answer