Sinking Fund - Compounded SemiAnnually

• November 3rd 2008, 06:26 AM
ndcruz
Sinking Fund - Compounded SemiAnnually
Parents have set up a sinking fund in order to have $120,000 in 15 years for their children’s college education. How much should be paid semiannually into an account paying 6.8% compounded semiannually? http://img363.imageshack.us/img363/4707/pmtob8.png • November 3rd 2008, 11:44 AM masters Quote: Originally Posted by ndcruz Parents have set up a sinking fund in order to have$120,000 in 15 years for their children’s college education. How much should be paid semiannually into an account paying 6.8% compounded semiannually?

http://img363.imageshack.us/img363/4707/pmtob8.png

I replace PMT (payment) with R and FV(Future Value) with S in my formula.

The periodic payment R required to accumulate a sum of S dollars over n periods with interest charged at the rate of i per period is:

$R=\frac{iS}{(1+i)^n-1}$

S = \$120,000

n = 30 (semi-annual periods in 15 yrs)

i = .068