To pay off $50,000,000 worth of new construction bonds when they come due in 20 years, a water municipality must deposit money into a sinking fund. Payments to the fund will be made quarterly, starting three months from now. If the interest rate for the sinking fund is 8% compounded quarterly, how much will each deposit be?

To pay off $50,000,000 worth of new construction bonds when they come due in 20 years, a water municipality must deposit money into a sinking fund. Payments to the fund will be made quarterly, starting three months from now. If the interest rate for the sinking fund is 8% compounded quarterly, how much will each deposit be?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Characteristics of Bonds

Question

To pay off $50,000,000 worth of new
construction bonds when they come due in
20 years, a water municipality must deposit
money into a sinking fund. Payments to the
fund will be made quarterly, starting three
months from now. If the interest rate for
the sinking fund is 8% compounded
quarterly, how much will each deposit be?

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