Answer to Question #135141 in Economics of Enterprise for Chantile

Question #135141

The municipality of Smallville has arranged to borrow $30 million in order
to implement several public projects (flood control, school security, etc.). The
interest rate will be 3% per year, payable at the end of each year. This $30
million debt will be retired by making principal payments of $5 million at
the end of each year. The Board of Supervisors is concerned that it will take
too long to pay off this debt. How many years will it take to retire this $30
million debt and its associated interest payments?

Expert's answer

Using the nper function in excel , we can find out the number of years required to retire this $30 million debt.

=nper(3%,-5000000,30000000,0,0)

The value returned is 6.713767936.

The value is rounded to 7 years .