Question

1. 4. (Annuity payments) The Knutson Corporation needs to save $15 million to retire a $15 million mortgage that matures in 10years. To retire this mortgage, the company plans to put a fixed amount into an account at the end of each year for 10years. The Knutson Corporation expects to earn 5.7 percent annually on the money in this account.
   1. What equal annual contribution must the firm make to this account to accumulate the $15 million by the end of 10years?
   2. Prepare, on a spreadsheet, how the deposits will accumulate to $15 Million

Answer 1

Annual deposit	$1,154,151.45
Year	Opening balance	Deposit	Closing balance
1	$0.00	$1,154,151.45	$1,154,151.45
2	$1,154,151.45	$1,154,151.45	$2,374,089.54
3	$2,374,089.54	$1,154,151.45	$3,663,564.10
4	$3,663,564.10	$1,154,151.45	$5,026,538.70
5	$5,026,538.70	$1,154,151.45	$6,467,202.86
6	$6,467,202.86	$1,154,151.45	$7,989,984.88
7	$7,989,984.88	$1,154,151.45	$9,599,565.47
8	$9,599,565.47	$1,154,151.45	$11,300,892.16
9	$11,300,892.16	$1,154,151.45	$13,099,194.46
10	$13,099,194.46	$1,154,151.45	$15,000,000.00

WORKINGS