Dubois Inc. wishes to accumulate $1,377,500 by December 31, 2024, to retire bond

Question

Dubois Inc. wishes to accumulate $1,377,500 by December 31, 2024, to retire bonds outstanding. The company deposits $237,000 on December 31, 2014, which will earn interest at 10% compounded quarterly, to help in the retirement of this debt. In addition, the company wants to know how much should be deposited at the end of each quarter for 10 years to ensure that $1,377,500 is available at the end of 2024. (The quarterly deposits will also earn at a rate of 10%, compounded quarterly.) (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

Explanation / Answer

A= P(1+r/100)n

A=?

P= Principal =$237,000

R= Rate Of Interest 10 % p.a ie 2.5% quarterly or 0.025

N=10 years x 4=40 quarters

A=237,000( 1.0025)40

   =237,000 x   2.68506

   = $ 636,360

At Maturity Dubois inc Requires $1,377,500 and it will have $636,360 with the deposit of $237,000

Balance Matuirity amount required is $1,377,500-$636,360=$741,140

Hence it is proved that it should have balance $741,140 Maturity Amount

Let us find out how much additionally to be deposited

741,140 = P (1.025)40

741,140=2.68506 P

P=741,140/2.68506

P=276,000

It need to deposit $276,000

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.