Brief Exercise G-04 Vaughn Company issued $1,000,000, 10-year bonds. It agreed t

Question

Brief Exercise G-04 Vaughn Company issued $1,000,000, 10-year bonds. It agreed to make annual deposits of $76,000 to a fund (called a sinking fund), which will be used to pay off the principal amount of the bond at the end of 10 years. The deposits are made at the end of each year into an account paying 6% annual interest. Click below to view the factor tables. Table 1. Future Value of 1 Table 2. Future Value of an Annuity of 1 Table 3. Present Value of 1 Table 4. Present Value of an Annuity of 1 (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) What amount will be in the sinking fund at the end of 10 years? (Round answer to 2 decimal places, e.g. 25.25.) Amount in the sinking fund s Question Attempts: 0 of 3 used

Explanation / Answer

Future value of annuity=Annuity[(1+rate)^time period-1]/rate

=$76000[(1.06)^10-1]/0.06

=$76000*13.18079

which is equal to

=$1,001,740.04(Approx).

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