Question
In: Accounting
John Fowler borrowed $97,320 on March 1, 2018. This amount plus accrued interest at 6% compounded...
John Fowler borrowed $97,320 on March 1, 2018. This amount plus
accrued interest at 6% compounded semiannually is to be repaid
March 1, 2028. To retire this debt, John 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 5% per
annum.
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How much must be contributed each year by John Fowler to provide a
fund sufficient to retire the debt on March 1, 2028?
can you please explain in details
Solutions
Expert Solution
Amount of repayment including interest = amount borrowed *(1+i)^n
=$97,320*(1.03)^20
=$97,320*1.80611
=$175,770.63
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