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Calculate: A Sinking Fund

A Corporation issues 15,000,000 bonds in to be retired in 20 years. How much must be paid into a sinking fund up front at 4% compounded annually to pay off the total amount due?

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Supposing M dollars should be paid annually then the future value of each annual payment is:
FVi=M*(1+r)^(20-i)
where i=0,1,2,...,19 ...

Solution Summary

In about 60 words, this solution is comprised of a step by step response which illustrates how to compute the amount of a sinking fund. All calculations are included.

$2.19