Question: Lake Forest School District needs to build an additional elementary school due to capacity. In conjunction with the Delaware Department of Education, they have decided

due to capacity. In conjunction with the Delaware Department of Education, they

Lake Forest School District needs to build an additional elementary school due to capacity. In conjunction with the Delaware Department of Education, they have decided to sell state bonds to cover the construction of the new school. An Delaware state savings bond can be converted to $125 at maturity eight years from purchase. If the state bonds are to be competitive with U.S. savings bonds which pay 6% annual interest (compounded annually), at what price must they sell the bonds? (Assume no cash payments on savings bonds prior to redemption.) Show the formula and all work. Time Value: FV=PV(FVFk,n)FVOA=PMT(FVFOAk,n)PV=FV(PVFk,n)PVOA=PMT(PVFOAk,n) Bond Valuation: V=(INTPVFOA)+(MPVF)

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