A Firm Wishes to Establish a Fund Which, in 10

question 129

Essay

A firm wishes to establish a fund which, in 10 years, will accumulate to $10,000,000. The fund will be used to repay an outstanding bond issue. The firm plans to make deposits, which will earn 12 percent, to this fund at the end of each of the 10 years prior to maturity of the bond. How large must these deposits be to accumulate to $10,000,000?

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Definitions:

Ordinary Course

Pertains to regular business activities and operations conducted by an entity under normal circumstances.

Security Interest

A financial mechanism that gives a lender priority over the borrower's assets or property in the case of default.

Financing Statement

A document filed by a creditor to indicate a security interest in the personal property of a debtor, used to perfect a lien.

Perfection

In the context of securing interests in property, it is the process of completing all required legal steps to enforce a security interest against third parties.