MATH 034 Lecture Notes - Lecture 5: Savings Account
Document Summary
Sinking funds: setting up an annuity with a future value goal in mind, an annuity for which the amount of the payments is determined by the future value desired. Ex: calvin has set a goal of having ,000 in a savings account in 5 years. He plans to make equal deposits to the account at the end of each month, and expects the account to earn 3. 6% interest. How much should his deposits be? i = . 036/12 = 0. 003: n = 5x12 = 60, sn/i = [(1+. 003)^60-1]/. 003 = 65. 63160098, 10,000 = pmt (65. 63160098) = . 37. Ex: i = . 038/12 = . 003166667: n = 3x12 = 36, sn/i = [(1+. 003166667)^36-1]/ . 003166667 = 38. 06850328, 7,000 = pmt (38. 06850328, pmt = . 88. Ex: pat and tracy took out a 30-year load for ,000 at 7. 2%. Complete an amortization table for their first 12 monthly payments: for the first month, interest would be paid on the full 158,000.
