Question
A company borrowed $230,000 and set up a sinking fund to retire the debt in six years. It made equal deposits at the beginning of
A company borrowed $230,000 and set up a sinking fund to retire the debt in six years. It made equal deposits at the beginning of every six months into the fund and the fund was earning 8.85% compounded semi-annually.
a. Calculate the size of the periodic deposits into the fund.
Round up to the next cent
b. Calculate the fund balance at the end of the 4th payment period.
Round to the nearest cent
c. Calculate the interest earned in the 5th payment period.
Round to the nearest cent.
d. Calculate the amount by which the sinking fund increased in the 5th payment period.
Round to the nearest cent.
e. Construct a partial sinking fund schedule to illustrate details of the first two payments.
Payment Period | Payment | Interest Earned | Increase in the Fund | Fund Balance | Book Value |
0 | $0.00 | $230,000.00 | |||
1 | |||||
2 |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started