Answer:
Yearly savings =$7,375.20
Explanation:
The investment plan that enables you set aside an equal amount of money periodically earning a particular rate of rate to accumulate a target future sum is called a sinking fund.
A sinking fund is good and used for a retirement financial planning
To work out the equal periodic installment, we divide the target sum by a the future value of an annuity factor.
The future value of annuity factor is calculated as follows:
FVAF =( (1+r)^n -1)/r
r - interest rate per anum, n number of years.
For this question, we can work out the factor as follows:
interest rate per anum= 5%
FVAF = ((1+0.5)^(30)- 1)/0.05
=66.4388475
Yearly savings = Future sum/ FVAF
=490000/66.4388
= $7375.203189
Yearly savings =$7,375.20
