R = Price of Monthly Payments ($11,290.42) I need to estbalish a sinking fund to raise $800,000 in 5 years. How much interest is earned during the last year?
2006-11-21 16:31:21 · 2 answers · asked by NOooob! 1 in Science & Mathematics ➔ Mathematics
Egad! One way to do this is use the numbers given to find the interest rate.
The monthly interest rate is 005328287, or little more than 1/2 of 1% per month, more than 6% per year.
After four years, the sinking fund will have grown to $618,972.27. During the fifth year, 12 payments of $11,290.42 will be made, for a total payment of $135,485.04, leaving $45,542.69 in interest in the last year to bring the total fund to $800,000.
2006-11-21 16:46:13 · answer #1 · answered by ? 6 · 0⤊ 1⤋
P(t)=11290.42(1+x)^t/12
P(t)=800000(the money amount you are trying to reach)
t=5 years plug these into equation and solve for x
800000=11290.42(1+x)^5/12
70.86=(1+x)^5/12
1+x=5/12sqrt(70.86)
1+x=3.55
x=3.55-1=2.55
the interest rate was 255% compounded by 12 months
2006-11-22 01:11:51 · answer #2 · answered by Zidane 3 · 0⤊ 0⤋