neil1234

I think you are referring to Band of Investments method in Alternate Investments somewhere in there.
Let us say the property investor borrowed $1 at 5% interest to be repaid over 180 months in equal installments. According to an amortization schedule, she must repay the principal of $1 in addition to the monthly interest.
Every month she will pay the interest plus a very small amount as the repayment of the principal so that the principal is completely paid off in 180 months.
So, if the interest rate is 5%, that is not the complete cost for the borrower.
The complete cost should also include a proportionate repayment of the principal every month.
Sinking fund factor equals this small repayment of principal every month for every $1 borrowed.
You can calculate it using FV = -1, i = 5/12 %, N=number of months.
Calculate PMT. Say PMT = 0.005.
This 0.005 is what you will be paying back the lender every month in addition to the interest rate.
Each of these 0.005 will grow with time to repay the 1$ by the end of the mortgage.
So, if your mortgage is for 180 months, you pay back 0.005 in the first month towards principal repayment in addition to 5/12% interest in each month.
The first repayment of principal of 0.005 will grow for 179 months to become a larger amount.
The second payment of principla of 0.005 will grow for 178 months to become a larger amount.
All of these amounts put together will equal $1 by the end of 180 months and you would have completely paid off the principal in exactly 180 months.

Best of luck to you all in your forthcoming exams.