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Definition:
A sinking fund is a fund that is accumulated for the purpose
of paying off a financial obligation at some future designated
date.

The periodic payments are generally equal in size and made

at equal time interval (monthly, quarterly, half-yearly, etc)
It is also supposed that the payments are made at the end of
every payment period.
It is therefore considered as an immediate annuity.
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 The price of the market basket 1996-1999 is listed in the table below

Year Cost of the market basket

1996 RM10 640
1997 RM10 780
1998 RM10 810
1999 RM10 900
To calculate the CPI for each year, suppose we choose 1997 as base year

Inflation rate for

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A bond is a written contract between a borrower and a lender (bond holder). Through this contract,
the borrower promises to pay a specified sum at a specified future date, and to pay interest payments,
at a specific rate, at equal interval of time until the bond is redeemed

The purchase price of a bond is the combination of the present value of the annuity of periodic
Interest payment and the present value of the redemption price of the bond.

Let F be the face value and C be the redemption price. Let n be the number of periods
before redemption and id be the rate of interest per period
The periodic dividend payment, R = F x id
Let i be the yield rate per period, Present value of annuity of periodic dividend payments of R
𝟏− (𝟏+𝒊)−𝒏
for n periods is given by 𝑷𝟏 = 𝑹
𝒊
The present value of redemption price of the bond is given by 𝑷𝟐 = 𝑪(𝟏 + 𝒊)−𝒏
Purchase of a bond is given by V = 𝑷𝟏 + 𝑷𝟐

𝟏− (𝟏+𝒊)−𝒏
V=𝑹 𝒊
+ 𝑪(𝟏 + 𝒊)−𝒏
Remark: If the bond is redeemed at par, then C=F,
𝟏− (𝟏+𝒊)−𝒏
The purchase price will be given by V = 𝑹 + F(𝟏 + 𝒊)−𝒏
𝒊
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