15.5 sinking funds solutions[1]

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

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

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)

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

View Full Document
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)
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.

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.

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
Ask a homework question - tutors are online