SOLUTION: A man will deposit with a trust company a sum just sufficient to provide his family with an annuity of 750 dollars per month for 15 years. How much does he deposit if the fund accu
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Question 1167591: A man will deposit with a trust company a sum just sufficient to provide his family with an annuity of 750 dollars per month for 15 years. How much does he deposit if the fund accumulates at {4 1/2%, m=12}? Answer by ikleyn(52781) (Show Source):
You can put this solution on YOUR website! .
A man will deposit with a trust company a sum just sufficient to provide his family with an annuity
of 750 dollars per month for 15 years. How much does he deposit if the fund accumulates at {4.5%, m=12}?
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In this problem, they talk about the sinking fund, which is a monthly compounded account. It provides
monthly outpayments of $750 every month during 15 years. The account is compounded monthly at the annual
rate of 4.5%.
They want you find the starting (= the original) amount of money in the fund.
The total outpayment from the fund in 15 years is
Total = 750*12*15 = 135000 dollars.
To answer the problem's question, we should calculate the Present Value of this amount.
The Present Value is
PV = = 68822.95.
Thus the problem is just solved.
The initial amount in the fund must be (at least) $68,822.95. ANSWER
Then the fund will be able to pay out $750 every month during 15 years.
