The city isrequired to make regular payments every 3 months into a sinking fund paying 5.4% compounded quarterly. At the end of 10 years, the bond obligation will be retired with a cost of $5,000,000. A) What should each payment be? B) How much is earned during the 10th year?

The city isrequired to make regular payments every 3 months into a sinking fund paying 5.4% compounded quarterly. At the end of 10 years, the bond obligation will be retired with a cost of $5,000,000. A) What should each payment be? B) How much is earned during the 10th year?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 20P

See similar textbooks

Related questions

Q: Find, per year before AND after tax return for an investment of 15,000 that runs for a twenty five…

A: Tax rates depend on the nature of investment whether equity or debt. Further, interest earned on…

Q: In order to accumulate $1,000,000 after 35 years, calculate the amounts that must be invested at the…

A: Computation:

Q: Maju City issued a RM700,500.00 face vale bond with four years until maturity. It will make…

A: Periodic deposit for sinking fund can be calculated by annuity from future value formula in excel…

Q: How much money can be withdrawn at the end of 15 years if: a. $2,000 is deposited at the end of each…

A: The future value of the deposit is the value of the current deposits on a future date based on the…

Q: Red Company invested $10,000 in a fund that was earning interest at a rate of 3.00% compounded…

A: The future value is the future worth of the amount that will be paid or received at future.

Q: A 15-year, $500,000 loan will be repaid by the sinking fund method. Interest only must be paid at…

A: A sinking fund increases a company's creditworthiness, it allows a small corporation to offer a…

Q: On March 15, year 1, ABC Corporation adopted a plan to accumulate P1,000,000 by September 1, year 5.…

A: Amount to be accumulated = P1000000 Number of deposits (n) = 4 r = 10% Let the annual deposit = A

Q: McKinnon's Machinery sets aside $4000.00 at the beginning of every six months in a fund to replace…

A: Given, $4000 is made at the beginning of every six months. Rate is 8% compounded monthly

Q: A business must raise $57,000 in five years. What should be the size of the owners quarterly payment…

A: Annuity refers to series of equalized payments that are paid or received at start or ending of…

Q: sinking fund is established such that $12,000 will be available to replace a facility at the end of…

A: In this we need to calculate the sinking fund factor from that we can get the payment.

Q: "To pay off $66000000 worth of new construction bonds when they come due in 31 years, a water…

A: Future value required (FV) = $ 66000000 Interest rate = 6.7% Quarterly interest rate (r) = 6.7%/4 =…

Q: To pay off $50,000,000 worth of new construction bonds when they come due in 20 years, a water…

A: An Annuity is a series of payments of fixed amounts and at fixed intervals. These can be of two…

Q: On January 15, 2012, Dolan Corp. adopted a plan to accumulate funds for environmental improvements…

A: Annuity refers to the series of payments made at an equal set of intervals. Annuity due refers to…

Q: A sinking fund is established to discharge a debt of $60,000 in 15 years. If deposits are made at…

A: using financial calculator, N =15*2 =30 I/Y = 4/2 =2 PV = 0 FV = -60000

Q: Deposits of $6000 are put into a fund at the end of each month for the next 9 years. At the end of…

A: The perpetuity refers to the regular payment of receipt for an infinite period of time at a certain…

Q: On March 15, year 1 ABC Corporation adopted a plan to accumulate P1,000,000 by September 1, year 5.…

A: Annual deposit = X Interest rate (i) = 10%

Q: business must raise $50,000 in 9 years. What should the size of the owners’ quarterly payments to a…

A: The future value of the annuity is the future worth of a cash flow series at a certain rate of…

Q: Cincinnati Company has decided to put $30,000 per quarter in a pension fund. The fund will earn…

A: Quarterly payment is $30,000. Maturity period is 10 years. Rate of interest is 6%. Compounding…

Q: A business needs ₱1,550,000 in eight years. How much should be deposited each quarter in a sinking…

A: Sinking Fund is a fund that is kept aside or borrowed to pay off a debt or a loan. It helps the…

Q: A fund of 25000 is to be accumulated by means of deposits of 1000 at the beginning of every year as…

A: Deposits are being done to get a lump-sum return on the periodic amount that has been invested.…

Q: Use the sinking fund formula shown to the right to determine the semiannual payments with 6%…

A: Sinking fund formula can be used to calculate the semiannual payment to accumulate the the amount.…

Q: "To pay off $58000000 worth of new construction bonds when they come due in 29 years, a water…

A: The time value of money is the idea that the value of money received today will be more worthy than…

Q: An investment required an initial payment of $10,000 and annual payments of $1,500 at the end of…

A: First we need to calculate present value of total outflows PV of outflows =initial payment +PMT…

Q: Find the amount of each payment to be made into a sinking fund earning 7 % compounded monthly to…

A: Future value is the worth of the current amount in future date after considering the interest rate…

Q: A company has to retire 500,000 debenture of 8% interest 10 years from today. The company plans to…

A: Sinking fund is created to accumulate fund which can be used to retire debt at maturity. In this…

Q: A company borrowed $60,000 for renovation. The company plans to set up a sinking fund that will pay…

A: Given: Loan = $60,000 Interest rate = 10% period = 5 years Compounded semi annually

Q: Sarasota Corporation, having recently issued a $20,134,100, 15-year bond issue, is committed to make…

A: Sinking Fund refers to amount which is set aside from profits to meet future known liability. It…

Q: A certain amount was invested on 2021 such that it generated a periodic payment of $10,000 at the…

A: The present value of the annuity due is the current worth of a cash flow series received or paid at…

Q: A company has retire 500,000 debentures of 8% interest 10 years from today. The company plans to put…

A: Sinking fund is created to retire debt of $500,000 after 10 years which would earn an interest of…

Q: Hot Wheels Depot needs to accumulate $23,750 in 5 years to purchase new equipment. What sinking fund…

A: Individuals or companies can accommodate an amount needed for the future by depositing the regular…

Q: A construction equipment with no salvage is to be replaced at the end of 12 years from now at a cost…

A: The replacement value of machine (i.e., 800,000) is the future value of annuity at 15% compounded…

Q: Urgently need. An engineer wishes to set up a special fund by making uniform semiannual…

A: Present Value: The present value is the value of cash flow stream or the fixed lump sum amount at…

Q: A company wants to accumulate $100,000 to purchase replacement machinery 8 years from now. To…

A: An annuity is the sum of an equal amount after an equal interval of time made in an account to…

Q: A contractor wishes to set up a special fund by making uniform semiannual end-of-period deposits for…

A: The present value of the annuity is the current worth of a cash flow series at a certain rate of…

Q: Deposits of 10 are placed into a fund at the end of each year for 18 years with the first deposit…

A: The time value of money is the idea that the value of money received today will be more worthy than…

Q: A company wants to accumulate $100,000 to purchase replacement machinery 8 years from now.To…

A: Annuity means no. of payment which is equal in size and made at equal interval of time. Person get…

Q: Coronado Corporation, having recently issued a $ 20,153,400, 15-year bond issue, is committed to…

A: The question is based on the concept of Financial Management.

Q: To provide for the automation of a production process in five years, Dominion Chemicals is starting…

A: A fund that is created to repay a debt or replacement of an asset by putting an equal sum of amount…

Q: 1. Bomac Steel sets aside $5000 at the beginning of every six months in a fund to replace equipment.…

A: Compuattion:

Q: An amount of 50,000 was borrowed at an interest rate of 10% per year and repaid over a 5-year period…

A: Present value of all of future payments considering the interest rate and time period should be the…

Q: Northern Flying Science is preparing to buy an aircraft estimated to cost $600,000 by making equal…

A: a) Size of the quarterly payment N = 5*4 =20 I/Y = 8/4 = 2 PV =0 FV = -600,000 Compute PMT

Q: $4,250 was deposited at the end of every six months for 5 years into a fund earning 2.2% compounded…

A: Solution:- When an equal amount is deposited each period at end of period, it is called ordinary…

Q: In five years, ₱1.8M will be needed to pay for a building renovation. In order to generate this sum,…

A: We will Discount Future Value to End of Annual Payments Hence, we will discount money needed in 5…

Q: ayments of $4,000 are made into a fund at the beginning of each year for ten years. The fund is…

A: Future value of a present value is the value of that amount after taking into account the time value…

Q: Deposits of 10 are placed into a fund at the end of each year for 18 years with the first deposi…

A: The today value is the present value of annual series considering the interest rate and given period…

Q: Jones Assoc. borrowed $40,000. The company plans to set up a sinking fund that will pay back the…

A: Given information: Amount borrowed : $40,000 time period : 8 years rate of interest : 12%…

Q: Red Company invested $20,000 in a fund that was earning interest at a rate of 3.00% compounded…

A: Answer a:- The future value of an investment is calculated using the following formula:- Future…

Question

The city isrequired to make regular payments every 3 months into a sinking fund paying 5.4% compounded quarterly. At the end of 10 years, the bond obligation will be retired with a cost of $5,000,000. A) What should each payment be? B) How much is earned during the 10th year?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

Step 2

Step 3

Step 4

Step 5

Trending now

This is a popular solution!

Step by step

Solved in 5 steps with 4 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

If 90,000 is invested in a fund on December 31, 2019, and 5 equal annual withdrawals of 23,138.32 are made starting on December 31, 2020, that will deplete the fund, what is the interest rate being earned if interest is compounded annually?
If Bergen Air Systems takes out a $100,000 loan, with eight equal principal payments due over the next eight years, how much will be accounted for as a current portion of a noncurrent note payable each year?
Project A costs $5,000 and will generate annual after-tax net cash inflows of $1,800 for five years. What is the NPV using 8% as the discount rate?
Halep Inc. borrowed $30,000 from Davis Bank and signed a 4-year note payable stating the interest rate was 4% compounded annually. Halep Inc. will make payments of $8,264.70 at the end of each year. Prepare an amortization table showing the principal and interest in each payment.
Using the information provided, what transaction represents the best application of the present value of an annuity due of $1? A. Falcon Products leases an office building for 8 years with annual lease payments of $100,000 to be made at the beginning of each year. B. Compass, Inc., signs a note of $32,000, which requires the company to pay back the principal plus interest in four years. C. Bahwat Company plans to deposit a lump sum of $100.000 for the construction of a solar farm In 4 years. D. NYC Industries leases a car for 4 yearly annual lease payments of $12,000, where payments are made at the end of each year.
To pay off $50,000,000 worth of new construction bonds when they come due in 20 years, a water municipality must deposit money into a sinking fund. Payments to the fund will be made quarterly, starting three months from now. If the interest rate for the sinking fund is 8% compounded quarterly,how much will each deposit be?
sinking fund is established such that $12,000 will be available to replace a facility at the end of 10 years. At the end of 4 years, following the fourth uniform payment , management decides to retire the facility at the end of 9 years of life. At an interest rate of 6 percent, compounded annually, what are the payments during the first 4 and last 5 years?
A city has issued bonds to finance a new convention center. The bonds have a total face value of $3,000,000 and are payable in 8 years. A sinking fund has been opened to meet this obligation. If the interest rate on the fund is 6.7% compounded quarterly, what will be the quarterly payments? (Round your final answer to two decimal places.)
Cincinnati Company has decided to put $30,000 at the beginning of each quarter in a pension fund. The fund will earn interest at the rate of 6% per year, compounded quarterly. Find the amount available in this fund after 10 years
A state agency issues $575 million in bonds to repair bridges in the state. The state establishes a sinking fund by depositing $4 million at the end of each quarter into the fund for 20 years to repay the bonds. The fund earns an annual interest rate of 5.8% compounded quarterly. How much money (in millions of dollars) is in the fund after 20 years? (Round your answer to two decimal places.)
On January 1, you deposited $6,000 in an investment account. The account will earn 10 percentannual compound interest, which will be added to the fund balance at the end of each year.Required (round to the nearest dollar):1. What will be the balance in the account at the end of 10 years?2. What is the interest for the 10 years?3. How much interest revenue did the fund earn in the first year? the second year?
The city of Glendale borrows $48 million by issuing municipal bonds to help build the Arizona Cardinals football stadium. It plans to set up a sinking fund that will repay the loan at the end of 10 years. Assume a 4 percent interest rate per year. What should the city place into the fund at the end of each year to have $48 million in the account to pay back their bondholders?