Question

Find the amount of each payment to be made into a sinking fund so that enough will be present to accumulate the following amount. Payments are made at the end of each period. The interest rate given is per period.$91,000; money earns 5% compounded quarterly for 4 3/4 years.A) $4,272.95B) $1,949.47C) $887.26D) $1,885.50

Answer 1

Answer:

A) $4,272.95

Explanation:

The computation of the amount of each payment made into a sinking fund is shown below:

= (Payment × interest rate) ÷ (1 + interest rate)^time - 1

where,

Interest rate is

= 5% ÷ 4

= 0.0125

And, the time is

= 19 ÷ 4 × 4

= 19

Now place these values to the above formula

So,

= ($91,000 × 0.0125)  ÷ (1 + 0.0125)^19 - 1

= $4,272.95

hence, the correct option is A.