Question

In the following ordinary annuity, the interest is compounded with each payment, and the payment is made at the end of the compounding period. Find the required payment for the sinking fund. (Round your answer to the nearest cent.) Monthly deposits earning 4% to accumulate $9000 after 10 years.

Answer 1

The formula to find out monthly contributions is [Accumulated amount/{1+rate/12)^(years*12)-1/(rate/12)}]

Therefore the accumulated amount is = [9000/{1+0.04/12)^(10*12)-1/(0.04/12)}] = $61.12

Hence, sinking fund monthly deposits should be of $61.12 to accumulate $9000 after 10 years.