A company is committed to make annual sinking fund deposits of $90,000. The deposits are made...
A company is committed to make annual sinking fund deposits of $90,000. The deposits are made on the last day of each year and yield a return on 10 percent. Will the fund at the end of 15 years be sufficient to retire the bonds?
Is numbers of years in this case 14 years or 15 years?
Homework Answers
It is a case of ordinary annuity. 15 years will be taken into account
In Ordinary annuity, amount is deposited at the end of the period only. The Ordinary annuity gives future value of 15 years but remember last deposit will not earn any interest, so annuity formula takes care of it and so we have to take 15 years only
Answer : 15 years (Thumbs up please)
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