Question

Home Insert Page Layout Formulas Data Review View Help PROTECTED VIEW Be careful-files from the Internet can contain viruses. Unless you need to edit, it's safer to stay in Protected View SIGN IN TO OFFICE It looks like your stored credentials are out of date. Please sign in as [email protected] so we can verify your subscription. Enable E & fx X C B D E F G H K L M You plan to buy property in Oregon five years from today. To do this, you estimate that you will need $30,000 at that time for the purchase. You would like to accumulate these funds by making equal annual deposits in your savings account, which pays 10 percent annually. If you make your first deposit at the end of this year, and you would like your account to reach $30,000 when the final deposit is made, what amount do you need to deposit annually? What if you waited until seven years from today and were willing to make the same annual deposits. How much would you have at the end of seven years for a property purchase?

Answer 1

This problem pertains to annuity:

a) by future value of ordinary annuity:

((1+r)" - 11 FV of Annuity =P P= Periodic Payment r = rate per period n = number of periods

we have to find P here

given n = 5 years

r = 10% per annum or 0.1 and FV = $30000

putting these values in the equation

P = $4913.92 Ans

b) here n=7 and P = $4913.92

putting and solving

F = $46619.19 Ans