Question

"Second Hand Software needs to accumulate $12,000 in 3 years to meet future needs. What sinking fund payment would they need to make at the end of each year, at 6% interest compounded annually?

Answer 1

Answer:

10075.43&

Step-by-step explanation:

We are given

Amount needed to be accumulated = A = 12000

Term period in years = T = 3 years

Rate of interest = R = 6%

Amount to be sinked (initial amount for investment) = P = ?

This is compound interest problem and formula for that is;

A= P $(1+\frac{R}{100} )^{T}$

Putting values;

==> 12000 = P $(1+\frac{6}{100} )^{3}$

==> 12000= P (1.06×1.06×1.06)

==> P = 12000 / 1.191016

==> P = 10075.43 &