   Chapter 12.III, Problem 1RE ### 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

# Note: Round to the nearest cent when necessary.For the following sinking funds, use Table 12-1 to calculate the amount of the periodic payments needed to amount to the financial objective (future value of the annuity). Sinking Fund Payment Time Period Nominal Interest Future Value Payment Frequency (years) Kate (%) Compounded (Objective) 1.$2,113.50 Every 6 months 8 10 Semiannually$50,000

To determine

To calculate: The amount of sinking fund payment where payment frequency is 6 months, the time duration is 8 years, the nominal rate of return is 10% and interest is compounded semiannually and the future value amount is $50,000. Explanation Given Information: Payment frequency is 6 months, the time duration is 8 years, the nominal rate of return is 10% and interest is compounded semiannually and future value amount is$50,000.

Formula used:

The formula to compute the sinking fund payment is,

Sinking fund payment=Future value of sinking fundFuture value table factor

Calculation:

Consider that Payment frequency is 6 months, the time duration is 8 years, the nominal rate of return is 10% and interest is compounded semiannually and future value amount is \$50,000.

The rate period is 5%(10%÷2 period per year).

The number of periods is 16(8 years×2 period per year)

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