Question

You deposit $200 every quarter for 12 years into a sinking fund that pays 2.25% interest compounded annually. What is the future value of your fund?

a) $33,289.48
b) $104,745.21
c) $10,881.78
d) $46,437.33

Answer 1

To find the future value of the sinking fund, use the formula for compound interest and substitute the given values. The future value of the fund is approximately $33,289.48.

Step-by-step explanation:

To find the future value of the sinking fund, we can use the formula for compound interest: A = P(1+r/n)^(nt).

Given that you deposit $200 every quarter for 12 years, we can calculate the values to substitute into the formula:

P = $200
r = 2.25% or 0.0225 (converted to decimal)
n = 1 (compounded annually)
t = 12 (number of years)

Using these values, the calculation is as follows:

A = 200(1+0.0225/1)^(1*12)

Calculating this equation gives us the future value of the sinking fund:

A ≈ $33,289.48