Question

Jeff wishes to accumulate $5,000 in 5 years. Use the appropriate formula to find the sinking fund payment she would need to make at the end of each year, at 5% interest, compounded annually

Answer 1

Answer:

$1, 154.873

Explanation:

The appropriate formula is

P   = PV ×             r    

                    1 − (1+r)−n

P is the amount that needs to be set aside every year

Where PV  is $5000

r is 5% or 0.05

n is five years

P = 5000 x      0.05          

       1-(1+0.05)-5

P= 5000 x      0.05      

             1-0.783526166

P= 5000 x (0.05/0.216473834)

P = 5000 x 0.2309747976

P= 1, 154.873