Question
In: Finance
Find the amount of each payment to be made into a sinking fund which earns 7%...
Find the amount of each payment to be made into a sinking fund which earns 7% compounded quarterly and produces $57000 at the end of 2.5 years. Payments are made at the end of each period.
The payment size is $___?
Round to the nearest cent.
Solutions
Expert Solution
Given that,
Interest rate r = 7% compounded quarterly
term of payment in year = 2.5 years
final value in account = $57000
So, each payment can be calculated using FV formula of annuity
PMT = FV*(r/n)/((1+r/n)^(n*t) - 1)
here n is compounding frequency = 4
=> periodic payment PMT = 57000*(0.07/4)/((1+0.07/4)^(4*2.5) -1) = $5265.39
The payment size is $5265.39
jeff jeffy answered 2 years agoRelated Solutions
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