Question

Solve the application problem.

Jeff Reschke bought a rare stamp for his collection. He agreed to pay a lump sum of $4000 after 5 years. Until then, he pays 6% simple interest every 6 months. (a) Find the amount of each semiannual interest payment. (b) Reschke sets up a sinking fund so that money will be available to pay off the$4000. He wants to make annual payments into the fund. The account pays 8% compounded annually. Find the amount of each payment into the fund. (c) Prepare a table showing the amount in the sinking fund after each deposit.

Payment Number Amount of Deposit Interest Earned Total in Account

Solution

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Answered 1 year ago
Answered 1 year ago
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Use the simple interest and sinking fund formulas to solve the exercise.

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