11. A sinking fund is being established, the goal of which is to reach $100,000.
ID: 1171017 • Letter: 1
Question
11. A sinking fund is being established, the goal of which is to reach $100,000. Calculate the payment, where i is the interest rate per period. 15. Elena's son will enter college 16 year from now. At that time, she would like to have $20,000 available for college expenses. For that purpose, her bank will set up an account that pay 7% compounded quarterly. If she makes payment into the account at the end of each quarter, what must Elena's payments be to achieve her goal? 17. Eduardo is a 40-year-old individual who plans to retire at age 65. Between now and then, $2000 is paid annually into his IRA account, which is anticipated to pay 5% compounded annually. How much will be in the account upon Eduardo's retirement? 24. The Brewsters are saving for their daughter's college days. They would like to be able to withdraw $800 each month from their account for five years once their daughter starts college. Assuming that their account will earn interest at the rate of 9% compounded monthly, what sum of money should the Brewsters have in the account when their daughter starts college?Explanation / Answer
Target Funds, FV = $ 100,000
n = 22
i = 0.03
Ordinary Annuity,
FV = PMT / i * [(1+i)n-1]
100000 = PMT / 0.03 * [(1+0.03)22-1]
100000 * 0.03 = PMT * [1.9161-1]
3000 = PMT * 0.9161
PMT = 3000 / 0.9161
PMT = $ 3,274.74
Payment = $ 3,274.74
PS: Only one question with 4 sup parts are allowed to answer at a time
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