You are the Director of Finance of Blackpool Limited which has just secured debt capital of GH750,000

through a bond issue. The terms of the bond require the setting up of sinking fund to retire the loan at the end of

its four-year term. The fund is expected to earn interest at the rate of 15.5% per annum.

You have been requested by your Chief Executive Officer to provide him with quantitative information

regarding how the sinking fund would be able to retire the loan.

You are required to:

i) Calculate the annual payment that must be made into the fund to enable the company retire the loan

as envisaged.

ii) Draw up a sinking fund schedule in respect of the above