E6.16 (LO 3) (Retirement of Debt)

Ricky Fowler borrowed $70,000 on March 1, 2018. This amount plus accrued interest at 6% compounded semiannually is to be repaid March 1, 2028. To retire this debt, Ricky plans to contribute to a debt retirement fund five equal amounts starting on March 1, 2023, and for the next 4 years. The fund is expected to earn 5% per annum.

Instructions

How much must be contributed each year by Ricky Fowler to provide a fund sufficient to retire the debt on March 1, 2028?

please give a explanation this two steps

The Future value of an annuity due of 1 for 5 period

(FVAD) FV of annuity = FV ordinary annuity *factor

= 5,525,63 * (1+0,05)

= 5,8019

Periodic Rent ($126,428 5,8019*) = 21,791