Question

A corporation creates a sinking fund in order to have $700,000 to replace some machinery in 11 years. How much should be placed in this account at the end of each week if the annual interest rate is 7% compounded weekly? (Round your answers to the nearest cent.)
$  

How much interest would they earn over the life of the account?
$  

Determine the value of the fund after 2, 4, and 6 years.

2 years		$
4 years		$
6 years		$

Answer 1

Calculating Weekly Deposit,

using TVM Calculation,

PMT = [PV = 0, FV = 700,000, N = 572, I = 0.07/52]

PMT = $813.28

Interest Earned = 700,000 - 813.28(572)

Interest Earned = $234,803.84

Value in 2 years = [PV = 0, PMT = 813.28, N = 104, I = 0.07/12]

Value in 2 years = $90,722.62

Value in 4 years = [PV = 0, PMT = 813.28, N = 208, I = 0.07/12]

Value in 4 years = $195,068.65

Value in 6 years = [PV = 0, PMT = 813.28, N = 312, I = 0.07/12]

Value in 6 years = $315,083.86