Calculate the size of the periodic sinking fund deposits. b. Calculate the sinking fund balance at the end of the 4th payment period. c. Calculate the amount of interest earned during the 5th payment period.

Calculate the size of the periodic sinking fund deposits. b. Calculate the sinking fund balance at the end of the 4th payment period. c. Calculate the amount of interest earned during the 5th payment period.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 20P

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Sepia Inc. issued $350,000 bonds that were redeemable in 7 years. They established a sinking fund that was earning 5.50% compounded semi-annually to pay back the principal of the bonds on maturity. Deposits were being made into the fund at the end of every 6 months.

a. Calculate the size of the periodic sinking fund deposits.

b. Calculate the sinking fund balance at the end of the 4th payment period.

c. Calculate the amount of interest earned during the 5th payment period.

d. Calculate the amount by which the sinking fund increased in the 5th payment period.

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