. The City of Cebu plan to improve the water system distribution of the city. The estimated cost f the improvement is about P 5,000,000. To raise the amount, the city decided to sell bonds to finance the said project. The rate is fixed at 5% payable yearly. The interest rate of the money is at 10% compounded yearly. The bond is redeemable 20 years from now at its face value. How much should the City of Cebu set aside yearly to pay-off its obligation?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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7. The City of Cebu plan to improve the water system distribution of the city. The estimated cost f the improvement is about P 5,000,000. To raise the amount, the city decided to sell bonds to finance the said project. The rate is fixed at 5% payable yearly. The interest rate of the money is at 10% compounded yearly. The bond is redeemable 20 years from now at its face value. How much should the City of Cebu set aside yearly to pay-off its obligation?
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