Question

Cullumber Company issued $940,000, 13-year bonds. It agreed to make annual deposits of $75,000 to a fund (called a sinking fund), which will be used to pay off the principal amount of the bond at the end of 13 years. The deposits are made at the end of each year into an account paying 4% annual interest.What amount will be in the sinking fund at the end of 10 years?

Answer 1

The amount that would be in the sinking fund at the end of 10 years is

$ 900,458.03

Step-by-step explanation:

The amount in the sinking fund at the end of ten years is determined by using fv formula in excel as shown below:

=fv(rate,nper,-pmt,pv)

rate is the 4% rate of interest at which deposits grow

nper is the length of time of the investment which is 10 years

pmt is the amount of annual deposit which is $75,000

pv is the present of total deposits which is unknown

=fv(4%,10,-75000,0)=$ 900,458.03