Question

Alan Fowler borrowed 96,970 on March 1, 2018. This amount plus accrued interest at 10% compounded semiannually is to be repaid March 1, 2028. To retire this debtAlan plans to contribute to a debt retirement five equal amounts starting on March 1 2023. and for the next years. The tund is expected to earn 9% per annum Click here to view factor tables How much must be contributed each year by Alan Fowler to provide a fund sufficient to retire the debt on March 1, 2028?

View Policies Show Attempt History Current Attempt in Progress Alan Fowler borrowed $96,970 on March 1, 2018. This amount plus accrued interest at 10% compounded semiannually is to be repaid March 1, 2028. To retire this debt, Alan plans to contribute to a debt retirement fund five equal amounts starting on March 1, 2023, and for the next 4 years. The fund is expected to earn 9% per annum. Click here to view factor tables How much must be contributed each year by Alan Fowler to provide a fund sufficient to retire the debt on March 1, 2028? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to decimal places, e.g. 458,583.) Annual contribution to debt retirement fund $ e Textbook and Media Save for Later Attempts: 1 of 3 used Submit Answer

Answer 1

Answer:

Amount to be repaid on March 1, 2028 =

Formula: FV = PV (FVF_{n, i})

                 FV = $96,970 (FVF_{20, 10})

                 FV = $96,970 (FVF_{20, 10})

                FV = $652,366

Future value of an annuity due of 1 for 5 periods at 9% = (1 + 0.09) × [((1 + 0.09)5 - 1) / 0.09] = 6.52334

Amount of annual contribution to retirement fund = $652,366/6.52334 = $100,005