Question

Using the sinking fund Table 13.3, complete the following: (Do not round intermediate calculations. Round your answer to the nearest cent.)

Required amount		Frequency of payment	Length of time	Interest rate	Payment amount end of each period
$25,000		Quarterly	6 Years	8%	$

TABLE 13.3 10% Period 1 Sinking fund table based on $1 8% 1.0000 0.4808 0.3080 0.2219 0.1705 0.1363 0.1121 2% 10000 0.4951 0.3268 0.2426 0.1922 0.105 0.1345 0.1165 0.1025 0.0913 0.0822 0.0746 0.0681 0.0626 0.0578 0.0537 0.0500 0.0467 0.0438 0.0412 0.0329 0.0270 0.0226 0.0192 0.0166 3% 10000 0.4926 0.3235 0.2390 0.1884 0.1546 0.1305 0.1125 0.0984 0.0872 0.0781 0.0705 0.0640 0.0585 0.0538 0.0496 0.0460 0.0427 0.0398 0.0372 0.0290 0.0233 0.0190 0.0158 0.0133 4% 10000 0.4902 0.3203 0.2355 0.1846 0.1508 0.1266 0.1085 0.0945 0.0833 0.0741 0.0666 0.0601 0.0547 0.0499 0.0458 0.0422 0.0390 0.0361 0.0336 0.0256 0.0200 0.0159 0.0129 0.0105 5% 10000 0.4878 0.3172 0.2320 0.1810 0.1470 0.1228 0.1047 0.0907 0.0795 0.0704 0.0628 0.0565 0.0510 0.0463 0.0423 0.0387 0.0355 0.0327 0.0302 0.0225 0.0171 0.0133 0.0104 0.0083 6% 10000 0.4854 0.3141 0.2286 0.1774 0.1434 0.1191 0.1010 0.0870 0.0759 0.0668 0.0593 0.0530 0.0476 0.0430 0.0390 0.0354 0.0324 0.0296 0.0272 0.0197 0.0146 0.0110 0.0084 0.0065 0.0940 0.0801 0.0690 0.0601 0.0527 0.0465 0.0413 0.0368 0.0330 0.0296 0.0267 0.0241 0.0219 0.0150 0.0105 0.0075 0.0053 0.0039 1.0000 0.4762 0.3021 0.2155 0.1638 0.1296 0.1054 0.0874 0.0736 0.0627 0.0540 0.0468 0.0408 0.0357 0.0315 0.0278 0.0247 0.0219 0.0195 0.0175 0.0113 0.0075 0.0050 0.0033 0.0023 40

Answer 1

Correct Answer:

Required amount	frequency of payment	length of time	interest	payment amount end of each period
$ 25,000.00	Quarterly	6 years	8%	$          822.50

Working:

PV of annuity = FV * factor rate at (8%/4) after (6*4) periods

PV of annuity = FV * factor rate at (2%) after (24) periods

= 25000 *0.0329

Payment amount at end of each period = $ 822.50

End of answer.

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