A city advertised to purchase $2 million in bonds. The bonds will be delivered on April 1, 2017, and interest will be paid on April 1 of the following years. the bonds mature as follows:

Maturity Dates Amount

4-1-2022 50,000

4-1-2023 50,000

4-1-2024 50,000

4-1-2025 100,000

4-1-2026 100,000

4-1-2027 100,000

4-1-2028 150,000

4-1-2029 150,000

4-1-2030 150,000

4-1-2031 550,000

4-1-2032 550,000

Two bids were received.

Bid #1: pay $2million, the interest rates for each maturity 2022 through 2030 =5.50% and 2031 through 2032 =6.25%

Bid #2: pay $2million, the interest rate for each maturity 2022 through 2024 =4.19% and 2025 through 2030 =5.75%, and 2031 through 2032 =6.50%

For each bid, what is the net interest cost (NIC) and the true interest cost (TIC)? Which bid is more advantageous to the city?

Answer rating: 100% (QA)

Okay here are the calculations Bid 1 Interest rates 20222030 550 20312032 625 Calc... View the full answer