   Chapter 12, Problem 30AT ### Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447

#### Solutions

Chapter
Section ### Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447
Textbook Problem

# Sinking fund payment Sinking Fund Payment Time Nominal Interest Future Value Payment Frequency Period (years) Rate (%) Compounded (Objective) 30. every 3 months 3 2 quarterly $3,600 To determine To calculate: The amount of sinking fund payment where payment frequency is 3 months, the time duration is 3 years, the nominal rate of return is 2%, future value amount is$3,600 and interest is compounded quarterly.

Explanation

Given Information:

Payment frequency is 3 months, the time duration is 3 years, the nominal rate of return is 2%, future value amount is $3,600 and interest is compounded quarterly. Formula used: The formula for future value of the ordinary annuity is, FV=Pmt×(1+i)n1i Here, FV is the future value, Pmt is the Annuity payment, i is the interest rate per period (nominal rate ÷ periods per year) and n is the number of periods (years × periods per year). Calculation: Consider that payment frequency is 3 months, the time duration is 3 years, the nominal rate of return 2%, future value amount is$3,600 and interest is compounded quarterly.

The rate period is 0.5% or 0.005(2%÷4 period per year).

The number of periods is 12(3 years×4 period per year)

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