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Chris Fowler borrowed $93,290 on March 1, 2018. This amount plus accrued interest at 8% compounded semiannually is to be repaid March 1, 2028. To retire this debt, Chris 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 7% per annum.How much must be contributed each year by Chris Fowler to provide a fund sufficient to retire the debt on March 1, 2025?

Respuesta :

Answer:

$43,027

Explanation:

The computation of the amount to be contributed each year is shown below:-

Amount to be repaid on March 1, 2025 = Loan amount × (1 + Interest Semiannually )^Number of years

= $93,290 × (1 + 0.04)^20

= $93,290 × 2.191123143

= $204,409.878

Amount to be contributed = Required future value ÷ Cumulative FV factor at 7% for 5 periods of annuity due

= $204,409.878

÷ 4.75074

= $43,027

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