Problema Solution
A city government has approved the construction of a $800 million sports arena. Up to $480 million will be raised by selling bonds that pay simple interest at a rate of 2% annually. The remaining amount (up to $640 million) will be obtained by borrowing money from an insurance company at a simple interest rate of 4%. Determine whether the arena can be financed so that the annual interest is $27 million. (If it is not possible, enter NONE for each answer.)
Answer provided by our tutors
interest = principal * rate * time
we take time = 1 (interest over 1 year)
interest income from the bonds:
480*0.02 = 9.6 million
interest income from the insurance company loan:
640*0.04 = 25.6 million
total interest income: 9.6+25.6 = 35.2 million
So, yes, the arena should be able to be financed since the annual interest would be over $27million