Business Mathematics Brief 12th Edition by Stanley Salzman ,Gary Clendenen, Charles Miller

Exercise 73

Solve the application problem. Round to the nearest cent.
SPORTS COMPLEX Prepare a sinking fund table for the first four payments for the community college sports complex described in Example.
Finding Periodic Payments
Administrators at a community college have decided to build, in 5 years, a new sports complex with two indoor 50-meter swimming pools and a large gymnasium. The cost estimate is $16,500,000. They decide to make end-of-quarter deposits into a fund expected to earn 6% compounded quarterly. Find ( a ) the amount of each quarterly payment and ( b ) the interest earned.
CASE IN POINT
SOLUTION
(a) Use
per compounding period for 5 × 4 years = 20 compounding periods in the sinking fund table on page to find.04325.
Quarterly payment = $16,500,000 ×.04325 = $713,625
Twenty end-of-quarter payments of $713,625 at 6% compounded quarterly will grow to $16,501,629 using the table in Section.
(b) Interest is the future value minus the payments.
Interest = $16,501,629 ? 120 × $713,6252 = $ 2,229,129 (rounded)