This sinking fund calculator provides a computation of the amount of money you will need to contribute to a sinking fund for each given period to reach a savings target.
You can calculate a sinking fund payment plan in five simple steps:
- Input the target sum of money you need to accumulate
- Enter the interest rate, in the form of a percentage, that you will earn each year
- Choose the compounding frequency from the drop-down options
- Input the total number of periods in years and/or months, and choose the currency
- Click on the Calculate button to generate the results.
What is a Sinking Fund?
A sinking fund is an account that is set up with the objective of saving a target amount of money as a means of ensuring future financial obligations can be serviced, or debt can be repaid. The sinking fund payment is the total cash reserves that need to be saved each month to achieve the target sinking fund.
Sinking Fund Formula
This sinking fund calculator is based on the following formula:
PMT = Periodic payment,
FV = Future value (amount),
i = Interest rate per compounding period,
n = Total number of payments.
*Note that the payments are made at the end of each period.
Sinking Fund Calculation
Example 1: A company needs to accumulate a sinking fund of $50,000 over the next three years. The payments are put aside at the end of every quarter and earn 6% interest that is compounded quarterly. The required sinking fund payment can be calculated as follows:
Solution: The annual interest rate in decimal form is 6 / 100 = 0.06, i = (0.06 / 4) = 0.015, n = (3 × 4) = 12, using the formula above, we get:
PMT = FV × i / ((1 + i)n - 1) = 50,000 × (0.015) / ((1 + 0.015)12 - 1) = $3,834
Example 2: A company needs to accumulate a sinking fund of $100,000 over the next five years. The payments are put aside at the end of every quarter and earn 6% interest per year. The required sinking fund payment can be calculated as follows:
Solution: The annual interest rate in decimal form is 6 / 100 = 0.06, i = (0.06 / 12) = 0.005, n = (12 × 5) = 60, using the formula above, we get:
PMT = FV × i / ((1 + i)n - 1) = 100,000 × (0.005) / ((1 + 0.005)60 - 1) = $1,433.28
Tell us about you
Find us at the office
Kajioka- Constanza street no. 39, 50889 Kuala Lumpur, Malaysia
Give us a ring
+59 850 269 756
Mon - Fri, 10:00-14:00