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Sinking Fund Schedule

This document contains two examples of sinking fund schedules. In the first example, Alexandra needs Tshs 500,000 in 5 years with an annual interest rate of 28%. To accumulate this amount, Alexandra must deposit Tshs 57,471.88 each year. The sinking fund schedule shows the annual deposits, interest earned, and growing balance over the 5 year period. In the second example, a contractor needs Tshs 20,000 for a new truck in 4 years with interest of 10% compounded semiannually. The required periodic payment is Tshs 2,094.44. The sinking fund schedule shows the semiannual payments, interest earned, and accumulating balance over the next 8 years.

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Thomasaquinos msigala Jr
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838 views8 pages

Sinking Fund Schedule

This document contains two examples of sinking fund schedules. In the first example, Alexandra needs Tshs 500,000 in 5 years with an annual interest rate of 28%. To accumulate this amount, Alexandra must deposit Tshs 57,471.88 each year. The sinking fund schedule shows the annual deposits, interest earned, and growing balance over the 5 year period. In the second example, a contractor needs Tshs 20,000 for a new truck in 4 years with interest of 10% compounded semiannually. The required periodic payment is Tshs 2,094.44. The sinking fund schedule shows the semiannual payments, interest earned, and accumulating balance over the next 8 years.

Uploaded by

Thomasaquinos msigala Jr
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

SINKING FUND

SCHEDULE
Example1
Alexandra is in need of sum of Tshs 500,000 at the end of 5 years’ time,
if the money is invested at 28% per annum
a)How much Alexandra must deposit in his account at the end of each
year in order to accumulate the required amount?
b) Prepare a sinking Fund schedule to show the growth of the fund in
his account

Solution
Givens
Sinking Fund For Future value = Tshs 500,000 , t = 5years, n = 1, r =
28% = 0.28
•   Asked to find payment sinking Fund,
a)

Therefore, the sinking fund payment = Tshs 57471.88


b) Prepare Sinking Fund schedule to show the growth of the fund in his
account

No P I= (i x B) B = (Bbefore +)
1 57471.88 - 57471.88 57471.88
1 57471.88 - 57471.88 57471.88
2 57471.88 16,092.13 73564.00 131035.88
2 57471.88 16,092.13 73564.00 131035.88
3 57471.88 36690.05 94161.93 225196.89
3 57471.88 36690.05 94161.93 225196.89
4 57471.88 63055.13 120527.00 345723.90
4 57471.88 63055.13 120527.00 345723.90
5 57471.88 96802.69 154274.57 499998.47
5 57471.88 96802.69 154274.57 499998.47
(500,000)
(500,000)
• 
Note
No = End of period payment, P = Periodic payment, I =
Interested earned by the fund

B=Amount in Fund (Balance accumulated),

 = Increasing of balance in this time moment (Increase in Fund)

Note that i =
Example 1
CBE consider a contractor foreseeing the need for new truck 4 years
from now. the price of the truck is forecast to be Tshs 20,000. The
contractor wishes to accumulate this amount with an interest of
10% Compounded semiannually

a) Calculate the payment in the sinking fund


b) Prepare a payment sinking schedule to show the cash growth in
CBE account for the next 8 years
Solution
Sinking Fund for Future value = Tshs 20,000, t = 4years n = 2 r =
10% =0.1
• 
a) Asked to find the payment sinking Fund,

Payment sinking Fund = Tshs 2094.44


 
b) Prepare Sinking Fund schedule to show the growth of the fund in CBE
account
No P I = (i x B) B = (Bbefore + )
1 2094.44 - 2094.44 2094.44
2 2094.44 104.72 2199.16 4293.60
1
3 2094.44 -214.68 2094.44
2309.12 2094.44
6602.72
2
4 2094.44 104.72
330.01 2199.16
2,424.58 4293.60
9027.296
5
3 2094.44 451.36
214.68 2875.94
2309.12 11903.24
6602.72
6
4 2094.44
2094.44 595.16
330.01 2689.60
2,424.58 14592.84
9027.296
7
5 2094.44
2094.44 729.64
451.36 2824.08
2875.94 17416.922
11903.24
8
6 2094.44
2094.44 870.84
595.16 2965.29
2689.60 20382.21
14592.84
7 2094.44 729.64 2824.08 17416.922
8 2094.44 870.84 2965.29 20382.21

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