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 amount of time needed for the sinking fund to reach the given accumulated amount. (Round your answer to two decimal places.)

$3500 yearly at 6% to accumulate $100,000.

yr

Solution

Answer:

Annual Payment = $3,500
Accumulated Sum = $100,000
Annual Interest Rate = 6%

Let n be the number of years required to accumulate the required sum

$3,500 * FVIFA(6%, n) = $100,000

Using financial calculator:
I/Y = 6%
PV = 0
PMT = -3500
FV = 100000

N = 17.14

So, it will take 17.14 years to accumulate the required sum.