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iris [78.8K]
2 years ago
14

A town wishes to build a new school that will cost $15,000,000. The school is to be built in 10 years. The town will provide fun

ding for the new school by depositing a uniform amount into an investment fund paying 5% per year, compounded annually. How much must be set aside in each of the 10 years to provide for the new school?
Business
1 answer:
Stella [2.4K]2 years ago
7 0

Answer:

Annual deposit= $1,192,568.62

Explanation:

Giving the following formula:

Future Value= $15,000,000

Number of periods= 10 years

Interest rate= 5% compounded annually

<u>To calculate the annual deposit, we need to use the following formula:</u>

FV= {A*[(1+i)^n-1]}/i

A= annual deposit

Isolating A:

A= (FV*i)/{[(1+i)^n]-1}

A= (15,000,000*0.05) / [(1.05^10) - 1]

A= $1,192,568.62

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Answer:

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Dr Cash                                $285,600

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The June 30 and 31 December Year 2 interest on the bonds are recorded thus:

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Dr Interest expense(bal fig) $7,840                                          

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Dr Premium on bonds           $560

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Semi-annual interest payment=$280,000*6%*6/12

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