The payments made in a sinking fund are $5,000 at the end of each quarter for 3 years. Assume the interest...

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2. The payments made in a sinking fund are $5,000 at the end of each quarter for 3 years. Assume the interest rate is 10% compounded quarterly. Calculate the interest earned at the end of Period 2.

SnapAndSolve AI · Accepted Answer

To calculate the interest earned at the end of Period 2, we use the formula for compound interest: A = P(1 + r/n)^(nt), where:

P is the principal amount ($5,000)
r is the annual interest rate (10% or 0.10)
n is the number of times interest is compounded per year (4 for quarterly)
t is the time in years (0.25 for one quarter)

Interest for Period 2 is calculated on the balance at the end of Period 1:

Interest = $5,000 * (0.10/4) = $125

Therefore, the interest earned at the end of Period 2 is $125.

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The payments made in a sinking fund are $5,000 at the end of each quarter for 3 years. Assume the interest...

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