MT 1123 Lecture Notes - Sinking Fund

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MTH 124 Section 3.3
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Example 1
Suppose you deposit $100 every month into an account that pays 5% interest
compounded monthly. How much will you have in the account after 2 years?
Example 2
If you deposit $1,000 per year into an annuity for 18 years at 8% interest
compounded annually, what is the future value? How much of that is interest?
Example 3
What must your annual deposits be if you would like to have $75,000 after
18 years and your interest rate is 8% compounded annually?
Example 4
You set up a sinking fund to help you save $30,000 for a down payment on a
house. You’re going to make monthly payments for 5 years that earn 5.8% interest
compounded monthly. How much do your monthly payments have to be to reach
your goal?
How much interest was earned during the last year of the sinking fund?
Example 5
Suppose you setup an ordinary annuity at 7% interest compounded monthly that
will be worth $1,000,000 on your 65th birthday. How much will your payments
be if you start saving at:
a) age 50
b) age 35
c) age 23
Calculate the total amount you must contribute and the total interest earned for
each of the above starting ages.
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Document Summary

Suppose you deposit every month into an account that pays 5% interest. What must your annual deposits be if you would like to have ,000 after. You set up a sinking fund to help you save ,000 for a down payment on a house. You"re going to make monthly payments for 5 years that earn 5. 8% interest compounded monthly. Suppose you setup an ordinary annuity at 7% interest compounded monthly that will be worth ,000,000 on your 65th birthday. How much will your payments be if you start saving at:

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