Question

Asunking fund amounting to $17,000 is to be created by making payments at the beginning of every months for 7 years. Interesteamed by the fund is 62% compounded semi-annually Determine the size of the periode payment and compute the interesteamed during the fourth payment interval Verify your answer by checking the sinking fand schedule The size of the payment is (Round the final answer to the nearest cant as needed. Round all intermediate values to be decimal places as needed) Complete the table rounding each entry to the nearest cent (Do not include the symbol in your answers) Periodic Payment Interval Payment Interval Increase in Number Payment Fund Balance End of Payment interval (Beginning) i 31% 0 1 2 DOOD DOOD 3 4

Answer 1

Answer (a):

The size of the payment is $ 958.51

Working:

Sinking fund = FV = $17,000

Semiannual interest = RATE= 6.2% / 2 = 3.1%

Number of semiannual periods = 7 * 2 = 14

The size of the payment = PMT(rate, nper, pv, fv, type) = PMT(3.1%, 14, 0, -17000, 1) = $958.51

Answer (b):

The interest earned during fourth payment interval is = $124.50

The completed table is as follows:

Payment Interval Number Periodic Payment (Beginning) Payment Interval Interest i = 3.1% Increase in Fund Balance at the End of Payment Interval 0 1 2 3 958.51 958.51 958.51 958.51 29.71 60.35 91.93 988.22 1,018.86 1,050.44 988.22 2,007.08 3,057.53 4 124.50

Above table with 'show formula' is as follows:

A B D E Payment Interval Number Periodic Payment (Beginning) Payment Interval Interest Increase in Balance at the End of i = 3.1% Fund Payment Interval 1 0 2 0 3 1 =E2+D3 =C3+B3 =C4+B4 4 2 =E3+D4 =PMT(3.1%,14,0,-17000,1) =(E2+B3) *3.1% =B3 1=(E3+B4)*3.1% =B4 1=(E4+B5)*3.1% =B5 1=(E5+B6) *3.1% 5 3 =C5+B5 =E4+D5 6 4 7