The management of a condominium association anticipates a capital expenditure of
ID: 3346638 • Letter: T
Question
The management of a condominium association anticipates a capital expenditure of $160,000 in 2 years for the purpose of painting the exterior of the condominium. To pay for this maintenance, a sinking fund will be set up that will earn interest at the rate of 5.4%/year compounded monthly. Determine the amount of each (equal) monthly installment the association will be required to deposit into the fund at the end of each month for the next 2 years. (Round your answer to the nearest cent.)Explanation / Answer
sry forgot to break lines in my answer... so here it is again :) The principle amount is: $160000 Using the formula:- Amount, A= P*(1-R)^t where, P->Principle amount R->rate, i.e. interest per unit time t->total time take to return the money A=160000*(1- 0.54/12)^24 (rate is divided by 12 since rate is give per annum and the interest is compounded monthly.) therefore, A=160000*(1.045)^24 => A=160000*2.8760138 => A=460162.20(rounded to 2 decimals since the question requires us to round to a single cent) Therefore the total amount to be given in 24 months is $ 460162.20 => Every month installment, E= 460162.20/24 => E=19173.43 Thus, the association will be required to deposit $19173.43 monthly installment into the fund at the end of each month for the next 24 months
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