BUSINESS ADMINISTRATION
BUSINESS MATHEMATICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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40 months
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50 months
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60 months
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70 months
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Detailed explanation-1: -How do you calculate sinking fund? First, multiply the percentage interest by the principal amount. This will equate to the interest amount, which is then added to the principal amount. This total is the amount of money that needs to be in the sinking fund to meet the set financial obligation.
Detailed explanation-2: -The rule also means if you want your money to double in 4 years, you need to find an investment that earns 18% per year compounded annually.
Detailed explanation-3: -Present value (PV) is the current value of a future sum of money or stream of cash flows given a specified rate of return. Present value takes the future value and applies a discount rate or the interest rate that could be earned if invested.
Detailed explanation-4: -Let’s say for example that ExxonMobil Corp. (XOM) issued US$20 billion in long-term debt in the form of bonds. Interest payments were to be paid semiannually to bondholders. The company established a sinking fund whereby $4 billion must be paid to the fund each year to be used to pay down debt.