A company has contracted to make the following payment $33,000 immediately, $ 15

Question

A company has contracted to make the following payment $33,000 immediately, $ 1500 at the end of year 1; $2500 at the end of year two; $3500 at the end of year 3, $4500 at the end of year 4; $5500 at the end of year 5.  What fixed amount of money should the company plan to set aside each year at 7% interest per year, compounded annually, in order to make the above payments? A company has contracted to make the following payment $33,000 immediately, $ 1500 at the end of year 1; $2500 at the end of year two; $3500 at the end of year 3, $4500 at the end of year 4; $5500 at the end of year 5.  What fixed amount of money should the company plan to set aside each year at 7% interest per year, compounded annually, in order to make the above payments?

Explanation / Answer

Year 1: $1500+$105 = $1605

Year 2: $2,500+$175 = $2,675

Year 3: $3,500+$245 = $3,745

Year 4: $4,500+$315 = $4,815

Year 5: $5,500+$385 = $5,885

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