Question

Bates Company issued $1,000,000, 10-year bonds. It agreed to make annual deposits of $78,000 to a fund (called a sinking fund), which will be used to pay off the principal amount of the bond at the end of 10 years. The deposits are made at the end of each year into an account paying 6% annual interest. What amount will be in the sinking fund at the end of 10 years

Answer 1

Answer:

FV= 1,243,119.12

Explanation:

Giving the following information:

Annual deposit= $78,000

Number of periods= 10 years

Interest rate= 0.1

To calculate the future value, we need to use the following formula:

FV= {A*[(1+i)^n-1]}/i

A= annual deposit

FV= {78,000*[(1.1^10) - 1]} / 0.1

FV= 1,243,119.12