Why do public organizations use municipal bonds to finance long-term capital projects?
A major urban center is planning to issue a $100 million, 20-year, semiannual-interest-paying municipal
bond for the construction of a stadium.
The interest rate is 5.875%, based on the economic and financial conditions of the city and city
government.
The design and issuance costs are estimated to be $10 million and 1%, respectively.
What is the total interest paid if the city decides to adopt a level debt service structure?
How much will the city still owe on this bond at the end of each year?