The town of Welston borrows $5,000,000 at 7% c.s.a. interest payable semi-annually, full principal due and payable in 10 years. A sinking fund is set up with semi-annual deposits made estimated to earn 4%c.s.a.

a) Find the Sinking Fund deposit amount.

b) Find the annual expense (SF deposit and interest).

c) Determine the effective rate of the sinking fund.

Round it to two decimal places.

d) After 4 years have passed it is found that the fund contains $1,700,000. Find the new semi-annual contributions necessary for the fund to achieve its goal if for the remaining 6 years the estimated rate of interest is 5% c.s.a.

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Answer rating: 100% (QA)

a To find the sinking fund deposit amount we need to calculate the semiannual deposit that when compounded at an estimated rate of 4 csa will accumula... View the full answer