How to Calculate and Solve for Sinking Fund | Equal Payment Series | Economic Equivalence

Last Updated on April 6, 2024

The image above represents sinking fund. To calculate sinking fund, three essential parameters are needed and these parameters are Future Amount or Worth (F), Interest Rate (i) and Number of Years (N).

The formula for calculating sinking fund:

A = Fi / [((1 + i)^N) – 1]

Where:

A = Annual Worth or Amount
F = Future Worth or Compound Amount
i = Interest Rate
N = Number of Years

Let’s solve an example;
Find the sinking fund when the future worth is 28, the interest rate is 0.2 and the number of years is 11.

This implies that;

F = Future Worth or Compound Amount = 28
i = Interest Rate = 0.2
N = Number of Years = 11

A = Fi / [((1 + i)^N) – 1]
A = 28(0.2) / [((1 + 0.2)¹¹) – 1]
So, A = 28(0.2) / [((1.2)¹¹) – 1]
A = 28(0.2) / [(7.43) – 1]
A = 28(0.2) / [6.43]
Then, A = 28 x 0.0311
A = 0.87

Therefore, the sinking fund is ₦0.87.

Read more: How to Calculate and Solve for capital recovery | Equal Payment Series | Economic Equivalence

How to Calculate Sinking Fund | Equal Payment Series Using Nickzom Calculator

Nickzom Calculator – The Calculator Encyclopedia is capable of calculating the sinking fund.

To get the answer and workings of the sinking fund using the Nickzom Calculator – The Calculator Encyclopedia. First, you need to obtain the app.

You can get this app via any of these means:

Web – https://www.nickzom.org/calculator-plus

To get access to the professional version via web, you need to register and subscribe for NGN 1,500 per annum to have utter access to all functionalities.
You can also try the demo version via https://www.nickzom.org/calculator

Android (Paid) – https://play.google.com/store/apps/details?id=org.nickzom.nickzomcalculator
Android (Free) – https://play.google.com/store/apps/details?id=com.nickzom.nickzomcalculator
Apple (Paid) – https://itunes.apple.com/us/app/nickzom-calculator/id1331162702?mt=8
Once, you have obtained the calculator encyclopedia app, proceed to the Calculator Map, then click on Economics under Engineering.

Now, Click on Economic Equivalence under Economics

Now, Click on Sinking Fund under Economic Equivalence

The screenshot below displays the page or activity to enter your values, to get the answer for the sinking fund according to the respective parameters which are the Future Amount or Worth (F), Interest Rate (i) and Number of Years (N).

Now, enter the values appropriately and accordingly for the parameters as required by the Future Amount or Worth (F) is 28, Interest Rate (i) is 0.2 and Number of Years (N) is 11.

Finally, Click on Calculate

As you can see from the screenshot above, Nickzom Calculator– The Calculator Encyclopedia solves for the sinking fund and presents the formula, workings and steps too.