sinking fund: necessary size of semi-annual deposits

missl

New member
Joined
Nov 12, 2007
Messages
33
Hi, I am not sure what number to be use for question 1 ...

The village of Selkirk has borrowed $225,000 at 13% compounded semi-annually from the regional district to build an office complex. The loan agreement requires the payment of interest end of every year. In addition, the village is to make equal payments into a sinking fund so that the principal can be retired after 15 years. Interest earned by the fund is 11% compounded semi-annually.

REQUIRED:
1) What is the size of the semi-annual deposits into the sinking fund?
 

Denis

Senior Member
Joined
Feb 17, 2004
Messages
1,723
Re: sinking fund

missl said:
The village of Selkirk has borrowed $225,000 at 13% compounded semi-annually from the regional district to build an office complex. The loan agreement requires the payment of interest end of every year. In addition, the village is to make equal payments into a sinking fund so that the principal can be retired after 15 years. Interest earned by the fund is 11% compounded semi-annually.
REQUIRED:
1) What is the size of the semi-annual deposits into the sinking fund?
$225,000 will be owing after 15 years (since the interest is being paid each year).

So you simply need to calculate the semi-annual deposit that will accumulate to 225000 after 15 years.
FV = 225000, n = 30, i = .11 / 2 = .055
 

missl

New member
Joined
Nov 12, 2007
Messages
33
Re: sinking fund

thanks denis :D
 

missl

New member
Joined
Nov 12, 2007
Messages
33
Hi, I know this question is the same as above. But its a differnent question that I need to do. I was wondering if someone can tell me if this need to convert to monthly interest rate



The village of Selkirk has borrowed $225,000 at 13% compounded semi-annually from the regional district to build an office complex. The loan agreement requires the payment of interest end of every year. In addition, the village is to make equal payments into a sinking fund so that the principal can be retired after 15 years. Interest earned by the fund is 11% compounded semi-annually.

REQUIRED:
What is the semi-annual interest payment on the debt?


PV 225,000 I 13/2 = 6.5% N 15(2)=30
I2= (1+I)^m/m2 -1
(1+0.065)^2/1-1n???? before I find the semi annual interest payment
 
Top