Question

find the monthly payments R needed to have a sinking fund accumulate the future value of A. the yearly interest rate r and the time t in years are given below. interest is compounded monthly. A=$10,000; r=2.5%; t=3R=$_________ (round up to the nearest cent)

Answer 1

the formular is

A = R(1 + r/m)^mt-1

A = $8000

r = 9% = 0.09

t = 1

therefore,

1 + r/m = 1 + 0.09/12

= 1 + 0.0075

= 1.0075

step 2

1.0075^12-1

= 1.0938 - 1

= 0.938

step 3

0.938/0.0075

=12.506

therefore,

8000 = 12.506 x R

R = 8000/12.506

R = $639.64