II. Serial Bonds and TIC in Excel.

Potterville Village wants to build a new entertainment complex, and issues a serial bond to be

paid over five years, receiving $905,000. The series of annual repayments (including both

interest and principal repayment at the end of each year) is as follows: $156,000; $157,000;

$245,000; $239,000; $287,000.

(A) Using the TIC approach in Finkler (pp. 227-228), use the IRR function in Excel to

calculate the effective interest rate of this stream of payments.

(B) Explain to the Potterville City Council why you are using the TIC approach, rather than

simply calculating a simple rate of return on this investment.