(a) Explanation Given Information: Payment frequency is 3 months, time duration is 4 years, nominal rate of return is 3.5 % and interest is compounded quarterly and future value amount of five cars is $ 38 , 500 each. Formula used: The formula to compute the sinking fund payment is, Sinking fund payment = F V × i ( 1 + i ) n − 1 Where, FV is the future value, i is the interest rate per period, n is the number of periods. Calculation: Consider that Payment frequency is 3 months, time duration is 4 years, nominal rate of return is 3.5 % and interest is compounded quarterly and future value amount of five cars is $ 38 , 500 each. The rate period is 0.875 % or 0.00875 ( 3.5 % ÷ 4 period per year ) . The number of periods is 16 ( 4 years × 4 period per year ) . Total cost of five police cars is $ 192 , 500 ( 5 × $ 38 , 500 ) Substitute $ 192 , 500 for future value, 0 (b) To determine To calculate: The amount of total interest where required to pay by the town of Bay Harbor to buy five new hybrid police cars at 3.5 % interest compounded quarterly of $ 38 , 500 each in 4 years.

Contemporary Mathematics for Business & Consumers

8th Edition

ISBN: 9781305585447

Author: Robert Brechner, Geroge Bergeman

Publisher: Cengage Learning

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Question

Chapter 12, Problem 33AT

(a)

To determine

To calculate: The amount of sinking fund payment required to deposit at the end of every 3 month by the town of Bay Harbor to buy five new hybrid police cars at 3.5% interest compounded quarterly of $38,500 each in 4 years.

(b)

To determine

To calculate: The amount of total interest where required to pay by the town of Bay Harbor to buy five new hybrid police cars at 3.5% interest compounded quarterly of $38,500 each in 4 years.

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Chapter 12 Solutions

Contemporary Mathematics for Business & Consumers

Ch. 12.I - Freeport Bank is paying 8% interest compounded...Ch. 12.I - Vista Savings Loan is paying 6% interest...Ch. 12.I - Katrina Byrd invested $250 at the end of every...Ch. 12.I - Use Table 12-1 to calculate the future value of...Ch. 12.I - Use Table 12-1 to calculate the future value of...Ch. 12.I - Use Table 12-1 to calculate the future value of...Ch. 12.I - Use Table 12-1 to calculate the future value of...Ch. 12.I - Use Table 12-1 to calculate the future value of...Ch. 12.I - Use Table 12-1 to calculate the future value of...Ch. 12.I - Use Table 12-1 to calculate the future value of...

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The amount of sinking fund payment required to deposit at the end of every 3 month by the town of Bay Harbor to buy five new hybrid police cars at 3.5 % interest compounded quarterly of $ 38 , 500 each in 4 years.

Solution Summary: The author calculates the amount of sinking fund payment required to deposit at the end of every 3 month by the town of Bay Harbor to buy five new hybrid police cars.

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To calculate: The amount of sinking fund payment required to deposit at the end of every 3 month by the town of Bay Harbor to buy five new hybrid police cars at 3.5% interest compounded quarterly of $38,500 each in 4 years.

To calculate: The amount of total interest where required to pay by the town of Bay Harbor to buy five new hybrid police cars at 3.5% interest compounded quarterly of $38,500 each in 4 years.

Chapter 12 Solutions