Question

The management of Gibraltar Brokerage Services anticipates a capital expenditure of $17,000 in 3 years' time for the purpose of purchasing new fax machines and has decided to set up a sinking fund to finance this purchase. If the fund earns interest at the rate of 10%/year compounded quarterly, determine the size of each (equal) quarterly installment that should be deposited in the fund. Please round the answer to the nearest cent. $1,232.28 O $1,079.95 $1,226.60 O $1,167.31 O $1,248.94

Answer 1

Solutions Given the Capital Expenditure, s= $17000 and t: 3 years, compounded quarterly time ire number of compounding per year m= 4 hence to tal number of Compounding n = 4*3 =12 0.025 Rate of interest is oor 4 hence by sinking fund fansula, we have R = si (1+1) R. 17000* 0.025 ( +0.025)" -, 425 R = 0.3448888242 R = $1,232.28 FR = $1232.28 option