Question

Find the amount accumulated FV in the sinking fund. HINT [See Example 1.] (Assume end-of-period deposits and compounding at the same intervals as deposits. Round your answer to the nearest cent.) $100 is deposited monthly for 10 years at 6% per year in an account containing $8,000 at the start FV

Answer 1

Total FV= $30,943.1

Step-by-step explanation:

Giving the following information:

Cash flow= $100

PV= $8,000

i= 0.06/12= 0.005

n= 10*12= 120

We will divide the calculation into two parts. First, we will calculate the final value of the $8,000:

FV= PV*(1+i)^n

FV= 8,000*(1.005^120)

FV= $14,555.17

Now, the final value of the monthly deposit:

FV= {A*[(1+i)^n-1]}/i

A= monthly deposit

FV= {100*[(1.005^120) - 1]} / 0.005

FV= $16,387.93

Total FV= 14,555.17 + 16,387.93

Total FV= $30,943.1