Solution to Sinking Fund and Amortization Problems

A company wishes to set up a sinking fund in an account that pays 4.3% interest compounded quarterly to repay a debt of $325,000 within 4 years explain to the company how much its payment should be pay off its debt along with how much interest will be accrued during 4 years ?

An organization has a $50,000 loan that is to be amortized over 10 years create an amortization schedule for a loan at 7.5% interest compounded monthly and if the company wanted to pay the loan off in 5 years?

© SolutionLibrary Inc. solutionlibary.com 9836dcf9d7 https://solutionlibrary.com/business/finance/solution-to-sinking-fund-and-amortization-problems-7fji

Solution Preview

...and if the company wanted to pay the loan off in 5 years.

Solution:
1. To compute for the for the amount to be paid quarterly, we'll use the formula:

Where:
P = amount to be paid per scheduled date
D = total amount of debt
r = interest rate per schedule
n= number of payments to complete payment

First, let's determine the given values:
D = $325,000
r = 4.3% = 0.043 annually, but since it is quarterly payments, r = 0.043/4 = ...