Question
Jeff Associates borrowed $20,000. The company plans to set up a sinking fund that will repay the loan at the end of 6 years. Assume a 10% interest rate compounded semiannually. What must Jeff pay into the fund each period of time? (Use Table 13.3.) (Do not round intermediate calculations. Round your answer to the nearest cent.)
TABLE 13.3 Period 2% 3% 4% 5% 6% 8% 10% 1 1.00001.0000 1.0000 100001.0000 1.0000 10000 2 0.4951 0.4926 0.4902 0.4878 0.48540.4808 0.4762 3 0.3268 0.32350.3203 0.3172 0.3141 0.30800.3021 4 0.24260.2390 0.2355 0.2320 0.2286 0.22190.2155 0.1638 0.1296 7 0.1345 0.1305 012660.1228 0.11910.1121 0.1054 0.0874 9 0.1025 0.0984 0.0945 0.0907 0.0870 0.0801 0.0736 10 0.09130.0872 0.0833 0.07950.0759 0.0690 0.0627 11 0.0822 0.0781 0.0741 0.0704 0.06680.0601 0.0540 12 0.07460.0705 0.0666 0.06280.0593 00527 0.0468 13 0.0681 0.0640 0.0601 0.0565 0.0530 0.0465 0.0408 14 0.0626 0.0585 0.05470.05100.0476 O.0413 0.0357 15 0.0578 0.0538 0.04990.04630.0430 00368 0.0315 16 0.05370.0496 00458 0.04230.0390 O.0330 0.0278 0.0247 0.0219 0.0195 0.0175 24 0.0329 0.0290 0.0256 0.0225 0.0197 0.0150 0.0113 28 0.02700.0233 002000.01710.0146 0.01050.0075 Sinking fund table based on $1 0.1922 -0. 1884 0.1846 0.1810 0177 4 0.1705 6 0.1350.1546 0.1508 0.14700.1434 0.1363 01085 01047 0.1165 0.1125 0.1010 0.0940 0.0500 0.0467 0.0438 0.0412 0.0460 0.0427 0.0398 0.0372 0.0422 0.0390 0.0361 0.0387 0.0355 0.0327 0.0354 0.0324 0.0296 0.0272 0.0296 0.0267 0.0241 0.0219 20 0.0336 0.0302 0 0.0133 36 0.01920.0158 0.0129 0.01040.0084 O.00530.0033 40 0.0166 0.0083 0.0065 0.0039 0.0023
Explanation / Answer
Given:
Amount = $20000
10% Interest rate
End of 6 years
Now,
We have to calculate the actual values ito periods and percentage
6*2 = 12 periods
10/2 = 5 % (semiannual interest rate)
From the given table ,
The value of table = 0.0628
Jeff pay into the fund each period of time = $ 20,000* 0.0628
= $1256
