A.Kirk wishes to accumulate $10,000 in 3 years for a down payment on a house. Us

Question

A.Kirk wishes to accumulate $10,000 in 3 years for a down payment on a house. Use Table 12-1 from your text to find the sinking fund payment he would need to make at the END of every month, at 6% interest compounded monthly.

a. $356.59

b. $3,733.58

c. $254.22

d. $2,773.58 1.5 points

B.Linens Plus wishes to pay off a debt of $15,000 in 2 years. What amortization payment would they need to make every month, at 12% interest compounded monthly? (Use Table 12-2 from your text)

a. $664.81

b. $684.10

c. $625.00

d. $706.10

Explanation / Answer

future value = 10000

let x be monthly payment

=>

x * [(1+6%/12)^36 -1]/6%/12 = 10000

=> x = 254.22

hence c is the answer

b)

present value of payments = 15000

let x be the monthly payment

x * [1 - (1+12%/12)^-24]/12%/12 = 15000

=>

x = 706.10

hence d is the answer

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