A company establishes a sinking fund in order to have 100,000 for upgrading office equipments in 4 years. If the company makes fixed monthly payments into an account paying 6.6% compounded monthly, how much should each payment be? How much interest will the account earn in 4 years?

I found that the monthly payments should be 1826.11 by using the future value of an annuity formula but I didn't understand how to find the interest

1 answer

1826.11 (1826.11019) is the correct monthly payment to obtain 100,000 at the end of four years. Note that your formula assumes that payments are made at the end of each month.

The interest is the cumulative amount at the end of four years less the total amount paid, namely 4*12*monthly amount.

So you just have to subtract 48 times the monthly payment from the accumulated amount, namely $100,000.