ECONOMICS
SAVING AND INVESTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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$400
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$300
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$275
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$500
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Detailed explanation-1: -The amount you have to save each month using sinking fund approach is $400.
Detailed explanation-2: -The easy approach to sinking funds Think of a sinking fund category that you want, add up a year’s worth of expenses, and then divide by 12. Set up an automatic deposit for that same amount every month. Done. Easy.
Detailed explanation-3: -Sinking fund method is a method of calculating depreciation for an asset in which apart from calculating depreciation, it also keeps aside a fund for replacing the asset at the end of its useful life. This method is used when the assets that need to be replaced are of high cost.
Detailed explanation-4: -Emergency funds are types of sinking funds categories that can help you pay for any unexpected expense that you weren’t planning for. In general, it’s recommended to have about three to six months of living expenses saved up. But you can save more or less depending on your personal circumstances.
Detailed explanation-5: -A = P.A (n, i) A = Saving amount. P = Periodic payment. Example: Calculate the needed amount that must be invested every year so that the total amount sums up to Rs. 3, 00, 000 by the end of 10 years. Solution: Here, A = Rs. A = P.A (n, i)