Blanchard Inc. would like to borrow $12 million for 20 years through a bond issue but has been having difficulty finding lenders willing to advance that much. The firm’s investment banker has advised the CFO that potential bond buyers are not worried about Blanchard’s ability to make the periodic interest payments on such a loan. However, they are concerned that it will have enough cash on hand to repay the loan when the principal is due in 20 years. The banker has suggested that a sinking fund might allay their fears, he also said funds deposited in such accounts can be expected to earn about 6% annually.

How much would Blanchard have to deposit each year if the fund is started

a. when the bonds are issued.

b. 5 years after the bonds are issued.

c. 10 years after the bonds are issued.

d. 15 years after the bonds are issued.