PLEASE SHOW IN EXCEL The debt service and the revenues in a city government are $3.1...

PLEASE SHOW IN EXCEL

The debt service and the revenues in a city government are $3.1 million and $30 million. respectively. What is the debt service ratio? If the benchmark debt Service ratio is 12 percent, does the city have additional debt capacity? Assume an annual interest rate of 5 percent and a twenty-year maturity for the debt, how much additional debt can the city carry? Assume an annual interest rate of 4 percent and a twenty-year maturity for the debt, how much additional debt can the city have? Assume an annual interest rate of 5 percent and a thirty-year maturity for the debt, how much additional debt can the city carry? Compare the results of the additional debt capacity amounts in the above three different circumstances in interest rate and maturity. Explain why they differ. If the benchmark debt service ratio is 10 percent, does the city have additional debt capacity? Why or why not?

Please show in Excel so I can understand.

Expert Solution

Thus we can see that as the rate of interest decreases, the amount of interest in the annual debt service gets reduced and there is a scope for additional repayment of principal, thus the amount of debt that can raised increases.

Also, as the number of years increases, the annual principal repayment gets reduced and thus there is a scope to riase additional amount of loan.

If the benchmark debt service ration is 10%, no additional amount of loan can be taken as the current debt service ratio of 10.33% already exceeds the benchmark.

For any clarification, please comment. Kindly Up Vote

ekkarill92 answered 2 years ago

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