Business and Finance

Anonymous

Question Description

What semiannually sinking fund payment would be required to yield $45,000 nine years from now? The annual interest rate is 4% compounded semiannually. (Use 4% at 9 years = 0.944930) The sinking fund payment is? Round to nearest cent as needed.

Tutor Answer

Furious
School: Purdue University

Future Value=FV = P [ (1 + i/c)^n - 1] / (i/c) 

where: 
FV = future value = $45000 
i = annual interest rate = 0.06 
c = number of compounding periods in a year = 2 
n = total compounding periods = 2*9 years = 18 periods 
P = periodic payment 

$45000 = P [ (1 + 0.04/2)^18 - 1] / (0.04/2) 
P = $2101.62

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