Results 1 to 6 of 6

Math Help - Sinking Funds

  1. #1
    Junior Member
    Joined
    Jun 2010
    Posts
    52

    Sinking Funds

    Here's a question for you guys....

    A company has borrowed $225,000 at 13% compounded semi-annually to build an office complex. The loan agreement requires the payment of interest end of every year. In addition, the company is to make equal payments into a sinking fund so that the principal can be retired after fifteen (15) years. Interest earned by the fund is 11% compounded semi-annually.




    1. What is the semi-annual interest payment on the debt?
    2. What is the size of the semi-annual deposits into the sinking fund?
    3. What is the total annual cost of the debt to the company?
    4. What is the interest earned by the sinking fund in the 20th payment interval?
    5. What is the balance of the fund after the 20th payment is made?
    6. What is the book value of the debt after twelve (12) years?



    This is what I got so far....

    #1 14,625

    #2
    30 n
    225,000 fv
    11 I/Y, C/Y + P/Y = 2
    comp pmt
    3,106.21

    #3......


    #4 5,484.47


    #5 108,308.41

    #6.....


    Sorry guys if I am not showing my work but I have been asked to learn how to use my financial calculator and that's what I did.

    thanks in advance.
    Last edited by petedam; August 1st 2010 at 05:21 AM.
    Follow Math Help Forum on Facebook and Google+

  2. #2
    MHF Contributor
    Joined
    Dec 2007
    From
    Ottawa, Canada
    Posts
    3,069
    Thanks
    65
    > 3: What is the total annual cost of the debt to the company?
    225000(1 + .13/2)^2 - 225000

    > 6: What is the book value of the debt after twelve (12) years?
    225000 - value of s.fund at end 12th year
    Follow Math Help Forum on Facebook and Google+

  3. #3
    Junior Member
    Joined
    Jun 2010
    Posts
    52
    I am doubting myself on #1

    this is what i did....225,000 x (13%/2) = 14,625

    Is this correct?
    Follow Math Help Forum on Facebook and Google+

  4. #4
    MHF Contributor
    Joined
    Dec 2007
    From
    Ottawa, Canada
    Posts
    3,069
    Thanks
    65
    Quote Originally Posted by petedam View Post
    I am doubting myself on #1
    this is what i did....225,000 x (13%/2) = 14,625
    Is this correct?
    It is the CORRECT amount, to be paid exactly every 6 months,
    if such is the arrangement.
    Follow Math Help Forum on Facebook and Google+

  5. #5
    Junior Member
    Joined
    Jun 2010
    Posts
    52
    • Is FV of sinking fund expressed as a negative number?
    • How about PMT into sinking fund, is that expressed as (-) number as well?
    • What is the interest earned by the sinking fund in the 20th payment interval? is this mean 20th and 21st? which would be = 11,441.44?
    Follow Math Help Forum on Facebook and Google+

  6. #6
    MHF Contributor
    Joined
    Dec 2007
    From
    Ottawa, Canada
    Posts
    3,069
    Thanks
    65
    Quote Originally Posted by petedam View Post
    • Is FV of sinking fund expressed as a negative number?
    • How about PMT into sinking fund, is that expressed as (-) number as well?
    • What is the interest earned by the sinking fund in the 20th payment interval? is this mean 20th and 21st? which would be = 11,441.44?
    1st 2 questions: depends on your calculator; check the manual

    Last question: whatever it means, it's for 6 months. If "interval" means before payment, then:
    the interest during 20th payment interval is balance at end of 19th payment times .055
    Follow Math Help Forum on Facebook and Google+

Similar Math Help Forum Discussions

  1. help with amortization/sinking funds?
    Posted in the Business Math Forum
    Replies: 4
    Last Post: April 21st 2011, 08:52 AM
  2. Stats - Mutual Funds
    Posted in the Statistics Forum
    Replies: 1
    Last Post: January 14th 2010, 07:47 PM
  3. Annuties and sinking funds
    Posted in the Business Math Forum
    Replies: 0
    Last Post: June 4th 2009, 10:57 AM
  4. Another Mutual Funds Q
    Posted in the Business Math Forum
    Replies: 0
    Last Post: November 11th 2008, 12:06 PM
  5. Sinking fund,thats sinking me
    Posted in the Business Math Forum
    Replies: 2
    Last Post: July 11th 2006, 08:04 AM

Search Tags


/mathhelpforum @mathhelpforum