question archive A company issued 100 bonds of P1,000 face value each, redeemable at par at the end of 15 years to accumulate the funds required for redemption
A company issued 100 bonds of P1,000 face value each, redeemable at par at the end of 15 years to accumulate the funds required for redemption
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A company issued 100 bonds of P1,000 face value each, redeemable at par at the end of 15 years to accumulate the funds required for redemption. The firm established a sinking fund consisting of annual deposits, the interest rate of the fund being 4%. What was the principal in the fund at the end of 12th year?
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Answer:
FV = 75,038.9 or 75,039
Step-by-step explanation
FV = P * ((1+rate)number of periods-1)/rate
100,000 = P * ((1.04)15-1)/.04
100,000 = P * (1.80094-1)/.04
100,000 = P * 20.0236
P = 4,994
Then, repeat with the no. of periods as 12
FV = 4,994 * (1.0412 -1)/0.04
FV = 75,038.9 or 75,039
