A Method of Calculating Sinking-Funds, and a Table of Values for Ordinary Periods and Rates of Interest.

Discussion of the paper of John B. Dilworth, presented at the Pittsburg meeting, March, 1910, and printed in Bulletin No. 35, November, 1909, pp. 1041 to 1043. FRANK FIRMSTONE, Easton, Pa. (communication to the Secretary*) :-Mr. Dilworth's formulas and tables are of course correct, and the extinction will occur as calculated, provided the money periodically set aside for sinking-fund be really invested. and the interest compounded as assumed in the calculation. Actually, in almost all cases, such funds are used "in the business," in which case, in addition to the periodical charges for principal of the fund, additional charges must be made at the end of each period to cover the interest and compound interest on previous charges. The periodical charge for sinking-fund thus becomes a varying and continually increasing one until the date of extinction. On many accounts it seems more natural and convenient to make the extinction by a fixed periodical charge under the legal rule for partial payments, namely, that each payment should apply first to the interest due at the date of payment;: and any remainder, after this is satisfied, be deducted from the principal before the interest for the next period is calculated. The formula below is convenient for such calculations S, Principal to be extinguished. Q, Periodical payment or charge for sinking-fund. B, Balance unpaid at date of nth payment, but before that payment is made. r, Rate of interest per period per cent. n, Number of payments or periods. Then, B=S(1+r)n-Q(1+ r)n-(1+r) Received July 27, 1910.