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 4% annually. The remaining amount (up to $640 million) will be obtained by borrowing money from an insurance company at a simple interest rate of 8%. Determine whether the arena can be financed so that the annual interest is $49 million.
Answer provided by our tutors
simple interest = principal * rate * time
we take time to be equal to 1
for the bond (4%) investment:
480*0.04 = 19.2 million
for the insurance company loan (8%):
640 * 0.08 = 51.2 million
total interest per year:
19.2 + 51.2 = 70.4 million
The arena could be financed since the need is $49 million per year and the investments should produce $70.4 million