Computing
Term of
Sinking Fund
GENYL ALTHEA B. SEÑO
BSED MATH 2
FORMULA:
n=
where;
Sn= accumulated amount
i = interest rate
R= periodic payment
EXAMPLE 1
How long will it take for quarter end
contribution of P 45, 969.40 to a Retirement
Plan to grow to P1.3 million if the plan earns
14% compounded quarterly?
GIVEN: How long will it take for
quarter end contribution
Sn = P 1,300,000 of P 45, 969.40 to a
Retirement Plan to grow
R = P 45,969.40 to P1.3 million if the plan
m=4 earns 14% compounded
quarterly?
j=14%
i = = = 0.035
Solution:
=
n=
=
=
n = 20
=
It will need 20 quarterly
payments of P 45, 969. 40 to
grow P 1,300,000
EXAMPLE 2
How many 5 equal payments of P 16,860.92
at the end of 6 months will be required to
accumulate to P 96,000.02 at 13%
compounded semi annually? Construct a
sinking fund schedule
GIVEN:
How many equal payments
of P 16,860.92 at the end of
Sn = P 96,000.02 6 months will be required to
R = P 16,860.92 accumulate to P 96,000.02 at
13% compounded semi
m=2 annually? Construct a
sinking fund schedule
j=13%
i = = = 0.065
Solution: =
n= =
= n =5
=
It will take 5 semiannual
payments of P 16, 860.92 to
accumulate to P 96,000.02
Sinking Fund
Schedule
Payment
Interval
In Fund at the
Beginning of
Interest at 6.5 %
Received of Fund at
Payment to Fund
at End of Interval
In Fund at the
End of Interval
Interval the End of Interval
1 0.000 0.000 P 16,860.92 P 16,860.92
2 1,095.960 16,860.92 34,817.800
3 34,817.800 2,263.157 16,860.92 53,941.877
4 53,941.877 3,506.222 16,860.92 74,309.019
5 74,309.019 4,830.086 16,860.92 96,000.025
TOTAL: 11,695.425 84,304.600
FBI = PBFEI PFEI= Periodic Payment (R)
=34,817.800 =16,860.92
IRFEI= RII * FBI FEI= FBI+ IRFEI +PFEI
=0.065 (34, 817.800) =34,817.800 += 2,263.157 +16,860.92
= 2,263.157 = 53,941.877
Enrichment Exercises 9.8
1. How many bimonthly payments of P 47, 079.18 must be
deposited in the bank to accumulate P 350,000 if the
interest is earned at 12% compounded bimonthly ?
2. Red Sirug wants to accummulate P 87,000 by depositing
P 16,634.42 in a fund at the end of each quarter. The fund
pays 9% compounded quarterly. How long will it take to do
this
Thank You!
