The answer is too rounded a number to be correct.Originally Posted by kwtolley
There are different ways to solve this. Not knowing what tools you're learning, I hesitate to give you a method. But here's how I look at it.
The difference between a sinking fund and a loan is that the sinking fund is valued in future dollars, the loan is valued in present dollars. To treat the sinking fund as a loan, discount the future dollars to convert them to present dollars.
So calculate to calculate the present value of the fund. The discount factor uses 2.5% quarterly interest for 20 quarters. Then treat that as a loan, or what is the same, an annuity.