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Find the monthly payment, needed to have a sinking fund accumulate the future value, $16,000. The yearly interest rate is 6.7% and the number of payments is 20. Interest is compounded monthly. Round your answer to the nearest cent.

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Answer:

PMT = $758.40

Explanation:

Sinking Fund Payment PMT = FV * i / [(1+i)n – 1]

Where, FV = Future value = 16000

i = monthly interest rate = 6.7%/12 = 0.5583%

n = number of months = 20

So, PMT = 16000 * 0.005583 / [1.00558320 – 1] = 16000 * 0.005583/ 0.117785 = $758.40