Fenland Co

Multiple Choice

Fenland Co. plans to retire $100 million in bonds in five years, so it wishes to create a fund by making equal investments at the beginning of each year during that period in an account it expects to earn 8% annually. What amount does Fenland need to invest each year?

A) $15,783,077.
B) $17,045,650.
C) $23,190,400.
D) Cannot be determined from the given information.This is the amount in the future value of an annuity due formula, where $100 million = investment amount x factor from Table 5 where n=5 and i=8%.Thus, Investment amount = $100 million 6.3359 = $15,783,077.