1) A city would have to borrow $2,500,000 at 8% to finance the construction cost of a new school. This sum would be paid off over a twenty five year period. The repayment would be financed out of general revenues, without any tax increase. Thus, other services of the value of the loan repayment would have to be foregone by the city’s 200,000 residents. Question. What is the annual, per capita revenue diversion the residents would have to absorb to finance the loan’s repayment?
2) You wish to make a down payment on a house at the end of four years. At 12%, what amount must you place in the bank each year to accumulate the $15,000?