Question

The factory manager estimates that P2,500,000 will be needed in 73/2 years. He decides that the factory should anvest a sum every 6 months in a fund. Interest is earned at 6% converted semi-annually.

a. How much is the semiannual investment?

b. How much will be in the fund after the 12th deposit?

c. How much interest is earned on the 6th deposit date?

d. How mach will the fund increase be on the 11th deposit date?

e. Construct the first 4 lines of the sinking fund schedule.

Answer 1

Part (a):

Semi annual investment = P134,416.45

 

Calculation using TI BA II Plus calculator:

Set END

P/Y = 2, C/Y= 2

N = 7.5*2=15

I/Y = 6

PV = 0

FV = 2,500,000

CPT PMT = -134,416.4512

 

Part (b):

Fund balance after 12th deposit = P1,907,642.25 as follows:

 

Continuing from the above,

2ND AMORT

P1 = 12 Hit↓

P2 = 12 Hit ENTER Hit↓

Display: BAL= -1,907,642.248

 

Part (c):

Interest earned on the 6th deposit date= P21,409.06 as follows:

Continuing from the above,

2ND AMORT

P1 = 6 Hit↓

P2 = 6 Hit ENTER Hit↓

Display: BAL =- 869,460.7013 Hit↓

Display: PRN =-155,825.507 Hit↓

Display: INT = 21,409.05583

 

Part (d):

Amount of fund increase on the 11th deposit date= P180,644.47

 

Calculations as below:

Balance after 10th deposit=P1,540,933.97 as follows:

2ND AMORT

P1 = 10 Hit↓

P2 = 10 Hit ENTER Hit↓

Display: BAL=-1,540,933.97

 

Balance after 11th deposit=P1,721,578.44 as follows:

2ND AMORT

P1 = 11 Hit↓

P2 = 11 Hit ENTER Hit↓

Display: BAL =-1,721,578.444

Increase in fund = 1721578.44-180644.47 = P1,540,933.97

 

Part (e):

First 4 lines of the sinking fund schedule as below:

 

a. CPT PMT = -134,416.4512

b. Display: BAL= -1,907,642.248