Question

KX Question 2 You make yearly payments of $800 in a sinking fund that pays 3% interest compounded annually. How much will be in your fund in 25 years? $55,834.08 $20,600.00 $19,419.48 $29,167.41

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Answer 1

• Answer: OPTION (D): $29, 167.41

Therefore, The Amount in the sinking Fund After Twenty-Five (25) Years will be OPTION (D): $29, 167.41

• Explanation:

• MAKE A PLAN:

We will use the SINKING FUND FORMULA to Calculate the FUTURE VALUE of the yearly payments:

FV = P * (1 + r)^n - 1 / r

• SOLVE THE PROBLEM:

FV = P * (1 + r)^n - 1 / r

• Where:

FV = Future Value of the Sinking Fund

P = Yearly Payment

r = Interest Rate Per Period

n = Number of Periods

• PLUG THE VALUES IN:

FV = 800 * (1 + 0.03)^25 - 1 /0.03

• Calculate the future values:

FV = 800 * 2.0933 - 1 / 0.03

FV = 800 * 36.443

• Calculate The Final Amount:

FV = 29167.41

• Draw The Conclusion:

Therefore, The AMOUNT in the sINKING FUND AFTER TWENTY-FIVE (25) YEARS will be: $29, 167.41

I hope this helps you!