Sagheer Is Setting Up a Fund to Help His Grandson's

question 151

Multiple Choice

Sagheer is setting up a fund to help his grandson's university education.He wants his grandson to be able to withdraw $3000 every 3 months for 3 years after he starts university.His first withdrawal will be 5½ years from now.If the fund can earn 7.2% compounded quarterly,what single amount contributed today will provide for the withdrawal?

• A)$32 119
• B)$22 083
• C)$52 077
• D)$42 041
• E)$36 000

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Definitions:

Premium on Bonds Payable

The amount by which the sale price of a bond exceeds its face value, reflecting higher-than-market interest rates or increased demand for the bond.

Amortization

The process of spreading out a loan or intangible asset cost over a fixed period of time for accounting and tax purposes.

Straight-Line Method

A method of allocating the cost of an asset evenly over its useful life.

Callable Bonds

Securities that the issuer has the option to repurchase before they reach their due date, at a specified call price.