15.5 sinking funds solutions[1]

15.5 sinking funds solutions[1] - 0011 0010 1010 1101 0001...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
1 4 2 5 1 0011 0010 1010 1101 0001 0100 1011 15.5 Sinking Funds 4 2 5 1 Amortization Review 1 blended periodic payment – covers all of the interest due and a portion of the principal with each payment: Outstanding Principal , periodic interest , principal portion interest is payable on the Outstanding Principal ONLY to calculate PMT use PV PV = loan (FV = 0)
Background image of page 1

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

View Full DocumentRight Arrow Icon
2 4 2 5 1 0011 0010 1010 1101 0001 0100 1011 Sinking Fund Method of Debt Extinction used when interest only is to be paid periodically and the principal is returned in 1 lump sum at the end of the term of the loan periodic interest = principal × periodic loan rate SINKING FUND is used to accumulate principal only • Amount of the Sinking Fund = Principal (loan) • SF deposit made at the same time as the interest payment is due • to calculate the SF deposit PMT use FV and SF rate FV = loan (PV = 0) 4 2 5 1 2 Interest Rates periodic loan rate used only to calculate the periodic interest Interest Payment = Principal × periodic loan rate SF rate used to calculate the SF deposit PMT = SF Deposit FV = loan (SF amount) I/Y = SF rate (PV = 0)
Background image of page 2
3 4 2 5 1 0011 0010 1010 1101 0001 0100 1011 On a $1,000, 1 year loan at j 4 = 12%, interest is to be paid quarterly.
Background image of page 3

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

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 10/04/2011 for the course MATH 1175 taught by Professor Jenny during the Spring '10 term at Fanshawe.

Page1 / 9

15.5 sinking funds solutions[1] - 0011 0010 1010 1101 0001...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online