Question

Jeff Associates borrowed $30,000. The company plans to set up a sinking fund that will repay the loan at the end of 8 years. Assume a 12 % interest rate compounded semiannually. What must Jeff pay into the fund each period of time?

Answer 1

let P be the payment

30000 = P(1.06^16 - 1)/.06

solve for P

Answer 2

that should have been

30000 = P(1 - 1.06^-16)/.06

Answer 3

$30,000
End of 8 years
12% interest

8*2= 16 periods
12/2= 6%

Go to the table in your math procedures book and look under sinking fund table (Practical Business Math Procedures Jeffery Slater/ Sharon M. Whittry 12th edition Page 12.)

table =.0390

$30,000 * .0390= $1170.00