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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