You expect to have to make a capital improvement expenditure of $50,000 in a property in 5 years. If you can only set aside at most $800 at the end of each month in a sinking fund, and the annual interest in the sinking fund is 6%, then how many months in advance of the 5-year horizon must you begin saving the money?

Question

Quizplus · Accepted Answer

To find the number of months needed, use the future value of an annuity formula. With a monthly deposit of $800, an annual interest rate of 6% (or 0.5% per month), and a target of $50,000, you need approximately 55 months to reach the goal.

You Expect to Have to Make a Capital Improvement Expenditure