Question

TB MC Qu. 09-13 Dr. J. wants to buy a Dell computer which will cost... Dr. J. wants to buy a Dell computer which will cost $2,600 eight years from today. He would like to set aside an equal amount at the end of each year in order to accumulate the amount needed. He can earn 8% annual return. How much should he set aside? Use Appendix C to calculate the answer. (Round your final answer to 2 decimal places.) 0.15 points eBook Print Multiple Choice References $219.43 O $244.43 $244.43 0 $294.43 $294.43 O $344.43 $344.43

Answer 1

This question requires application of FV of annuity, according to which

[(1+r) -1 FV of Annuity = P P= Periodic Payment r=rate per period n = number of periods

$2600 = P * [\frac{(1 + 0.08)^{8} - 1}{0.08}]$

2600 = P * 10.6366

P = $244.44