Math1313-Section5.3-Blank

Math1313-Section5.3-Blank - Section 5.3 – Amortizations...

This preview shows pages 1–3. Sign up to view the full content.

Section 5.3 – Amortizations and Sinking Funds 1 Section 5.3 Amortization and Sinking Funds To Amortize means to pay off a debt by installment payments. Amortization Formula The periodic payment R on a loan of P dollars to be amortized over n periods with interest charged at the rate of i per period is n i Pi R + = ) 1 ( 1 Sinking Fund A fund that is set up for a specific purpose at some future date is called a sinking fund. Sinking Fund 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 1 ) 1 ( + = n i iS R Example 1: Kelly wishes to buy a car that costs \$32,998. The car dealer tells her that they can finance the car at 6.25% per year compounded monthly for 5 years. She decides to secure the loan from the dealer. How much will her monthly payments be?

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Section 5.3 – Amortizations and Sinking Funds 2 Example 2: A person would like to have \$200,000 in an account for retirement 15 years from now. How much should be deposited quarterly in an account paying 6% per year compounded quarterly to obtain this amount? Example 3: A sailboat costs \$16,000. You pay 15% down and secure a loan for the remaining balance. How much are your monthly payments if 18% per year compounded monthly is charged over a period of 6 years? Section 5.3 – Amortizations and Sinking Funds 3 Example 4: Christina plans to go to Disney World in two summers and wishes to have \$7000 by then. How much money should she deposit monthly for the next 2 years in an account paying 3.25% per year compounded monthly to achieve this goal?...
View Full Document

This note was uploaded on 08/30/2010 for the course MATH Math 1313 taught by Professor Abdelnourahmed-zaid during the Fall '10 term at University of Houston.

Page1 / 3

Math1313-Section5.3-Blank - Section 5.3 – Amortizations...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online