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. A corporation creates a sinking fund in order to have $540, 000 to replace some machinery in 12 years. How much should be placed in this account at the end of each quarter if the annual interest rate is 4.1% compounded quarterly? (Round answers to the nearest cent.)

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beritop1089

Answer:

$10,371.04

Explanation:

The 540,000 is a future cashflow and you can use a financial calculator with the following inputs to find the recurring payment(PMT);

Future value; FV= $540,000

Duration of investment ; N = 12*4 = 48 quarters

Quarterly interest rate ; I/Y = 4.1%/12 = 0.342%

One time present cashflow ; PV = 0

Compute recurring payment ; CPT PMT = 10,371.036

Therefore, $10,371.04 at the end of each quarter.

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