. +n item worth $--, 0%% is purchased for a down payment of $, %%%.

Interest
is computed at 3' converted monthly and the balance to be settled with
payment of $", %% at the end of each month.
a) 9etermine the number of $", %%1payment needed.
b) #ind the siMe of 6nal payment.
c) ?onstruct the amortiMation schedule.

3. + loan of $"*, %%% bearing a "' interest converted annually is to be

amortiMed with eNual yearly payments for "% years.
a) #ind the siMe of each payment.
b) What should the outstanding liability be 7ust after the *th payment/
c) ?onstruct the amortiMation schedule.

0. +ster borrows $-3%, %%%. ;he plans to amortiMe her debt with eNual Nuarterly
payments for & years. Interest is allowed at ""' converted Nuarterly.
a) #ind the Nuarterly cost of his debt.
b) Hy how much is the debt reduced by the -rd payment/
c) ?onstruct the amortiMation schedule.

<. 8he cash value of motorcycle is $-&, %%. +ndro brought the item by
installment. e pays 0,%%% down payment and promised to settle the balance
with eNual payments due at the end of every month for " year. Interest is
converted monthly at "&'
a) ow large should each installment payment be/
b) +fter " year, how much of his balanced is reduced/
c) ?onstruct the amortiMation schedule.

5. Prepare the amortiMation table for the etinction of a debt of $"&,%%% with
interest at <' compounded bi1monthly in eNual bi1monthly installment for "
year.

"%. ?onstruct the amortiMation schedule of an obligation amounting $"*,%%%

bearing "<' interest compounded semi1annually for  years, to be paid in
eNual semi1annual payments.

0.# Sin3ing Fund

;in!ing fund refers to a fund created by ma!ing periodic deposits to
anticipate the need of paying a large amount of money at some future dates.

Seometric progression formulas for ordinary annuityQ

 R [ ( 1 + i ) ⁿ −1 ]
; i
 S (i)
2 1 −(1 + i ) ⁻ⁿ

Illustrative Examples
". + fund is created by ma!ing eNual monthly deposits of $-,%%% at 5'
converted monthly.
a. 9etermine the sum after half year.
b. What is the amount in the fund after the *th deposit/
c. ?onstruct the sin!ing fund schedule for a 31month period.

Siven 2  $-,%%% 7  5' or .%5 m  "&

Solution:
[ (1.0075 ) −1 ]
6

a) ;-,%%%
.0075
;-,%%%(3.""-3-"<*0)
;$"<, -*%.<5

b) n  *
[(1.0075 ) −1 ]
⁴

;-,%%% .0075
;$"&,"-.3<

c) ;in!ing fund schedule

o. o*  Perio Interest Increase mount
payme dic in Fund in Fund in Fund
nts Depo
sit
" $-,%% % $-,%%%.%% $-,%%%.%%
%
& -,%%% &&.% -,%&&.% 3,%&&.%
- -,%%% *."0 -,%*."0 5,%30.30
* -,%%% 3<.%" -,%3<.%" "&,"-.3<
 -,%%% 5".%& -,%5".%& ",&&3.0%
3 -,%%% ""*.&% -,""*.&% "<,-*%.5%

&. 8hree years from now, =r. 8 needs $-%,%%% to liNuidate a certain debt, at 3'
converted semi1annually.
a. ow much must he deposit at the end of every 3 months to provide for the
payment of the debt/
b. Prepare a sin!ing fund table showing the growth of the fund for - years.

a) Given:
;  $-%,%%%
 7  3'  .%3
m*
 30,000 ( .05 )
2 [ (1.015 ) −1 ]
6

450
 2  .093443263
2  $*,<".0

*) Sin+ing !und ta*le

Payme Deposi Interest Increase mount
nts t in Fund in Fund
" $*,<". % $*,<".03 $*,<".03
03
& *,<".0 0&.&* *,<<<.%% 5,0%-.03
3
- *,<".0 "*.3 *,53".-& "*,33.%<
3
* *,<".0 &"5.5< ,%-.0* "5,0%%.<&
3
 *,<".0 &5." ,""".&0 &*,<"&.%5
3
3 *,<".0 -0&."< ,"<0.5* -%,%%%.%-
3
Exercise 4.2
". + fund is being created by paying $&,%% at the end of each year a "%.&'
compounded annually for * years.
a. ow much money is in the fund 7ust after the -rd deposit/
b. ?onstruct a sin!ing fund schedule for * years.

&. =r. Imperial will deposit $"%,%%% at the O:+ Han! at the end of each
Nuarter for & years. If the ban!s gives out 5' compounded Nuarterly, 6nd
the amount to his credit 7ust after the last deposit.

-. What monthly payment into a sin!ing fund at <' compounded semi1annually

will be needed to raise $%,&%% at the end of & years and 3 months/

*. + fund of $%,%% is to be raised by 3 semi1annul payments at 3' converted

every 3 months.
a. #ind the semi1annual payment
b. ?onstruct a sin!ing fund table.

. Prepare a sin!ing fund table that shows the growth of fund in  months if
$",-%% is to be paid at the rate of "&' converted monthly.

0.' Sin3ing Fund Method o* 5etiring a De,t

+ typical loan of moderate siMe to an individual or a corporation is discharge by
the amortiMation method.
Illustrative Example
". 8he principal of a loan $*%,%%% will be at the end of " years by the
accumulation of a sin!ing fund by Nuarterly deposits, and interest will be
payable on the debt Nuarterly at the rate of 5'.
a. #ind the Nuarterly epense of the loan to debtor if his sin!ing fund is
invested at <' compounded Nuarterly.
b. #ind the boo! value of the debt 7ust after the *th deposit.
c. #ind the Nuarterly epense of the debt if he discharge all the liability as to
principal and interest by paying his creditor eNual sums at the end of each
- months for & years.

Given:
;  $*,%%%
n3

Solution:
S (i)
2 [ ( 1 + i ) −1 ]
n

40,000 ( .02 )
2 [ (1.02 ) n6
−1 ]
2  $3,-*".%-

 8he interest payable Nuarterly to the creditor is $*%,%%%(.%&&)  $5%%.

 8herefore, the Nuarterly epense of the debt is $3,-*".%- 4 $5%%  $0