A government is planning a sinking fund to retire $10,000,000 of term bonds that mature in 20 years.Semiannual additions will be made to the sinking fund for the next 20 years at the end of each period.It is estimated that a net return of 6 percent per annum,compounded semiannually,can be realized on the average.
a)Compute the necessary periodic additions for debt repayment (the amount of an annuity of $1 compounded at 3 percent (the semiannual rate)for 40 periods is 75.4012597).
b)What information would you need,in addition to the results of your computation in part a,in order to be able to prepare the revenue budget for debt service for the term bond issue?

Question

Quizplus · Accepted Answer

The Answer of A government is planning a sinking fund to retire $10,000,000 of term bonds that mature in 20 years.Semiannual additions will be made to the sinking fund for the next 20 years at the end of each period.It is estimated that a net return of 6 percent per annum,compounded semiannually,can be realized on the average.
a)Compute the necessary periodic additions for debt repayment (the amount of an annuity of $1 compounded at 3 percent (the semiannual rate)for 40 periods is 75.4012597).
b)What information would you need,in addition to the results of your computation in part a,in order to be able to prepare the revenue budget for debt service for the term bond issue?

A Government Is Planning a Sinking Fund to Retire $10,000,000