A City Has Two Sources to Borrow $200,000

question 6

Multiple Choice

A city has two sources to borrow $200,000.The first source is to borrow at j₁ = 9% and amortize the debt for 10 years with annual payments of $31,164.For the second source,the money can be borrowed at j₁ = 8% if the interest is paid annually and the principal is repaid in a lump sum at the end of 10 years.Assume that a sinking fund can earn money at j₁ = x%.At which of the following values of × will the second source be cheaper?
(a) 7% (b) 6% (c) 5%

• A)7% only
• B)6% and 7%
• C)5%,6% and 7%
• D)None of them

---

Definitions:

Rubisco

An enzyme involved in the first major step of carbon fixation, a process by which atmospheric carbon dioxide is converted by plants to energy-rich molecules.

Photorespiration

The process that reduces the efficiency of photosynthesis in C3 plants during hot spells in summer; consumes oxygen and produces carbon dioxide through the degradation of Calvin cycle intermediates.

Rubisco

An enzyme that catalyzes the first step of carbon fixation in the process of photosynthesis.

Calvin Cycle

A biochemical process in plants, algae, and cyanobacteria which converts carbon dioxide and water into organic compounds, especially sugars, using ATP and NADPH produced in photosynthesis.