Reaching a Financial Goal You need to accumulate $10,000. To do so, you plan to

Question

Reaching a Financial Goal

You need to accumulate $10,000. To do so, you plan to make deposits of $1,350 per year - with the first payment being made a year from today - into a bank account that pays 11.69% annual interest. Your last deposit will be less than $1,350 if less is needed to round out to $10,000. How many years will it take you to reach your $10,000 goal? Round your answer up to the nearest whole number.
year(s) __________

How large will the last deposit be? Round your answer to the nearest cent.
$ _________

Explanation / Answer

a) Future value of Annuity = P x [(1+r)n - 1]/r

10,000 = 1,350 x [(1+0.1169)n - 1]/0.1169

n = 5.64 years or 6years(rounded off to the nerest whole number)

b) Amount at the end of 5th year = [1,350 x CVAF(11.69%, 5 years)] x 1.1169 = (1,350 x 6.314) x 1.1169 = $9,520

Last Deposit = 10,000 - 9,520 = $480

Related Questions

Navigate

• Browse (All)
• Browse R
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.