What is the amount of payment to be made in a sinking fund?

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cnhy_tnzol

Business Finance

Description

What is the amount of payment to be made in a sinking fund so that the indicated amount will be there when needed. Round to the nearest cent $28,000 in 10 years,  money earns 10% compounded quarterly,   40 quarterly payments

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Explanation & Answer

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We have the formulas 

Given,FV=$28,000

i=10/4 =2.5% =.025

n=40

Substitute the value and solve for PMT.

Thus amount of money in the shrinking fund=$415.41



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