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What dollar amount must be set aside annually

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Question - An investment banking firm is arranging a financing package for St. Albany Hospital. The package calls for $25 million in bonds to be repaid in 20 years. A decision has to be made regarding the amount that must be deposited on an annual basis in a sinking fund. It is estimated that the sinking fund will earn interest at a rate of 10% compounded annually. What dollar amount must be set aside annually at year end by the hospital to meet the $25 million payment in the twentieth year?

Reference no: EM133068790

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