Question

A corporation creates a sinking fund in order to have $370,000 to replace some machinery in 8 years. How much should be placed in this account at the end of each week if the annual interest rate is 3.5% compounded weekly? (Round your answers to the nearest cent.)

$  

How much interest would they earn over the life of the account?
$  

Determine the value of the fund after 2, 4, and 6 years.

2 years		$
4 years		$
6 years		$

Answer 1

Since it’s a case of sinking fund, we need to save an amount weekly
Set
FV	370000
NPER(N)	416	(8 yrs x 52)
Rate(I/Y)	0.000673077	(3.5%/52)
PMT	($771.00)	Press CPT + PMT in BA-II to get the result
	=PMT(3.5%/52,416,,370000)
He should place $771 weekly in sinking fund to get the required amount of $370,000
Value of fund = 370,000
Less: Total deposits = 416 x 771 = $320,736
Interest earned = $49264
Value of fund after 2, 4 and 6 years
2 Years
PMT	771
NPER(N)	104	(2 x 52)
Rate(I/Y)	0.000673077	(3.5%/52)
FV	($83,028.16)	Press CPT + FV in BA-II to get the result
	=FV(3.5%/52,104,771)
4 Years
PMT	771
NPER(N)	208	(4 x 52)
Rate(I/Y)	0.000673077	(3.5%/52)
FV	($172,074.44)	Press CPT + FV in BA-II to get the result
	=FV(3.5%/52,208,771)
6 Years
PMT	771
NPER(N)	312	(6 x 52)
Rate(I/Y)	0.000673077	(3.5%/52)
FV	($267,575.06)	Press CPT + FV in BA-II to get the result
	=FV(3.5%/52,312,771)
2 years		$ 83,028.16
4 years		$172,074.44
6 years		$267,575.06