This paper covers a scenario based bond computation for a existent lifetime event. The Big Dig was a Boston’s Central Artery Project that was one of the greatest challenges that relocated the chief main road under the metropolis via burrowing. This paper aims to happen how much toll should be charged from each auto passing that path to cover the cost incurred to reconstruct the undertaking. Methods Calculating the value of the bond for each auto is a reasonably simple procedure. We merely necessitate to cognize how much in world will the entire sum the authorities is incurring plus how much the involvement rate the authorities is paying on the bond each twelvemonth.
With the amount of these two figures. we will acquire the entire cost the authorities has incurred on this undertaking. Then it is a simple instance of ciphering how many autos would go through from that main road in 30 old ages and merely spliting the entire cost of that undertaking with the entire figure of autos passed in 30 old ages. Result The computations show that the monetary value charged for each auto go throughing through the main road should pay about $ 17. 123 for the finance cost to be covered wholly. ( Calculations in Appendix ) Recommendations
The consequences from the computations are rather just sing the immense challenge this operation was. The monetary value of $ 17. 123 per auto will precisely cover the costs of the finance. However one maintain the world in head and should account for supernumerary added disbursal that the authorities would necessitate to pay in footings of fees. toll booths costs. care etc. For this ground a monetary value somewhat higher than the monetary value stated in the consequences subdivision should be asked so that the cost of such extra disbursals can be covered every bit good. Appendix The authorities took a 15 Billion bond financed for 30 old ages at 5 % involvement each twelvemonth.
This means that the authorities needs to payback the entire 15 Billion at the terminal of 30 old ages and the involvement of 5 % each twelvemonth. Interest Payments each twelvemonth = 5 % of 15 Billion = 0. 75 Billion Interest Payments in 30 Old ages = 0. 75 Billion x 30 Old ages = 22. 5 Billion Face Price to be returned = 15 Billion Total Value to be Returned = 22. 5 Billion + 15 Billion = 37. 5 Billion Number of Cars each Day = 200. 000 No. of Days in a Year = 365 No. of Years = 30 No. of Days in 30 Old ages = 10950 No. of Cars in 30 Old ages = 200. 000 ten 10. 950 = 2. 190. 000. 000 Therefore. Toll for each auto = 37. 5 Billion / 2. 19 Billion = $ 17. 123