Sinking Fund Calculator

This calculator helps you determine the regular payment needed to accumulate a specific amount in a sinking fund over a given period at a fixed interest rate.

Input Parameters

Calculation Results

Calculation Formula

The sinking fund payment (P) is calculated as:

P = FV * [i / ((1 + i)^n - 1)]

Where:
P = Payment amount
FV = Future Value
i = Interest rate per period
n = Total number of periods

Sinking Fund Calculator Usage Guide

Learn how to use the Sinking Fund Calculator and its working principles

How to Use the Sinking Fund Calculator

  1. Enter the Future Value (FV) - the amount you want to accumulate.
  2. Input the Annual Interest Rate (%) - the annual percentage rate at which your sinking fund will grow.
  3. Specify the Number of Years (n) - the number of years you plan to save.
  4. Select the Compounding Frequency per Year - how often the interest is compounded (e.g., annually, monthly).
  5. Click the Calculate button to determine the regular payment amount needed.

Working Principle

The Sinking Fund Calculator uses the formula for the future value of an ordinary annuity to calculate the regular payment amount needed to accumulate a specific future value. The formula is:

P = FV * [i / ((1 + i)^n - 1)]

Where:

  • P = Payment Amount
  • FV = Future Value
  • i = Interest Rate per Period
  • n = Total Number of Periods

Example

If you want to accumulate $10,000 (FV) in 5 years (n) at an annual interest rate of 5% (annual compounding), the monthly payment amount would be calculated as:

P = $10,000 * [0.0041667 / ((1 + 0.0041667)^60 - 1)] ≈ $157.42

This means you need to make monthly payments of approximately $157.42 to reach your goal of $10,000 in 5 years.