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19 October, 17:40

Find the monthly payment, needed to have a sinking fund accumulate the future value, $16,000. The yearly interest rate is 6.7% and the number of payments is 20. Interest is compounded monthly. Round your answer to the nearest cent.

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  1. 19 October, 20:09
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    PMT = $758.40

    Explanation:

    Sinking Fund Payment PMT = FV * i / [ (1+i) n - 1]

    Where, FV = Future value = 16000

    i = monthly interest rate = 6.7%/12 = 0.5583%

    n = number of months = 20

    So, PMT = 16000 * 0.005583 / [1.00558320 - 1] = 16000 * 0.005583 / 0.117785 = $758.40
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