Question

find the monthly payments R needed to have a sinking fund accumulate the future value A. the yearly interest rate r and the time t in years are given below. interest is compounded monthly.

Answer 1

The formula for sinking fund is expressed as

P = Ai/(1 + i)^n - 1

where

P is the amount of the payment

A is the amount to be accumulated

i is the interest rate per time period

n is the number of time periods

From the information given,

A = 9000

i = 6.5/100 = 0.065

Since it is compounded monthly,

i = 0.065/12 = 0.00542

n = 3 * 12 = 36

P = (9000 * 0.00542)/(1 + 0.00542)^36 - 1

P = 48.78/0.2148

P = 227.10

Thus, the monthly payment is

R = $227.10