Equal-Payment-Series Sinking-Fund (A/F)
In the same sense that single-payment compound-amount (F given P) and single-payment present-worth (P given F) are inverses of each other, equal-payment-series compound-amount (F given A) and equal-payment-series sinking-fund (A given F) are inverses of each other. This formula answers the question “what amount would need to be deposited or borrowed in n equal amounts at a given interest rate to be worth a desired amount immediately after the last payment?” The generic cash-flow diagram for this situation is shown in Figure 5.7. In this case, you know how much you want to end up with, and you are trying to find out how much to deposit each time.
Figure 5.7. The generic cash-flow diagram for equal-payment-series ...
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