Answer to Question #302595 in Economics for Paul

Question

The municipality of Smallville has arranged to borrow P30 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 P30 million debt will be retired by making principal payments of P5 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 P30 million debt and its associated interest payments?

Answer 1

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 .