In the following ordinary annuity the interest is compounded

In the following ordinary annuity, the interest is compounded with each payment, and the payment is made at the end of the compounding period.

Find the required payment for the sinking fund. (Round your answer to the nearest cent.)

Monthly deposits earning 4% to accumulate $2000 after 10 years.

$

Solution

Rate = 4%/12 = 0.03333

FV= $2000

N= 10*12 = 120 months

FV= Annuity*((1+r)^n-1)/r

Annuity = 2000*0.003333/(1.003333^120 -1)

=$13.58