Ace Co. has issued $10,000,000, 20-year bonds and plans to make annual sinking fund deposits of $240,000 at the end of each year in order to repay the bonds at maturity. a. Assuming the sinking fund yields a return of 7%, should the fund balance be sufficient to repay the bonds in 20 years? b. Compute the required annual sinking fund deposits needed to accumulate the $10,000,000 repayment.

Ace Co. has issued $10,000,000, 20-year bonds and plans to make annual sinking fund deposits of $240,000 at the end of each year in order to repay the bonds at maturity. a. Assuming the sinking fund yields a return of 7%, should the fund balance be sufficient to repay the bonds in 20 years? b. Compute the required annual sinking fund deposits needed to accumulate the $10,000,000 repayment.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 20P

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