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Problem on annual obligation payment

ABC Corp. has a challenge: The CEO wants to set aside annual, end of year payments into a sinking fund account earning 5% over the next 6 years in order to retire $25 million in bonds that will be outstanding at that time. Determine the annual payment required each year to meet the obligation of $25million in 6 years.

E

Expert

Verified

Let amt be “x”
(1.05)^5x+ (1.05)^4x+ (1.05)^3x+ (1.05)^2x+ (1.05)^1x = 25000000
Therefore 5.80188x=25000000
Or x= 4308948

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