- Apply the SPCA value given in a compound-interest table
Look up the SPCA value for the interest rate, 2 percent, and the number of interest peri-
ods, 12. Then substitute in S = P(SPCA) = $2600(1.268) = $3296.80.
PRESENT WORTH OF SINGLE PAYMENT
On January 1 of a certain year, a deposit was made in a fund that earns interest at 6 per-
cent per annum. On December 31,7 years later, the principal resulting from this deposit
was $1082. What sum was deposited?
Calculation Procedure:
Apply the SPPW relation
Obtain the SPPW factor for / = 6 percent, n = 1 years from the interest table. Thus P =
5(SPPW) = $1082(0.6651) = $719.64.
PRINCIPAL IN SINKING FUND
To accumulate capital for an expansion program, a corporation made a deposit of
$200,000 at the end of each year for 5 years in a fund earning interest at 4 percent per an-
num. What was the principal in the fund immediately after the fifth deposit was made?
Calculation Procedure:Apply the USCA factor
Obtain the USCA factor for / = 4 percent, n = 5 from the interest table. Substitute in the
relation S = R(USCA) = $200,000(5.416) - $1,083,200.
DETERMINATION OF SINKING-FUND
DEPOSIT
The XYZ Corporation borrows $65,000, which it is required to repay at the end of 5 years
at 8 percent interest. To accumulate this sum, XYZ will make five equal annual deposits
in a fund that earns interest at 3 percent, the first deposit being made 1 year after negotia-
tion of the loan. What is the amount of the annual deposit required?
Calculation Procedure:- Compute the sum to be paid at the expiration of the loan
Obtain the SPCA factor from the interest table for / = 8 percent, n = 5. Then substitute in
the relation S = P(SPCA) = $65,000(1.469) = $95,485.