Calculate annuity cash flows Your goal is to have $20,000 in your bank account b

Question

Calculate annuity cash flows Your goal is to have $20,000 in your bank account by the end of 15 years. If the interest rate remains constant at 8% and you want to make annual identical deposits, how much will you need to deposit in your account at the end of each year to reach your goal? $736.59 $810.25 $883.91 $589.27 If your deposits were made at the beginning of each year rather than an at the end, by how much would the amount of your deposit change if you still wanted to reach your goal by the end of 15 years? $73.66 $54.56 $68.20 $46.38

Explanation / Answer

Deferred annuity:

The correct answer is $ 736.59

Annuity x FVIFA8%, 15 years = Future Value or Annuity = $ 20,000 / 27.1521 = $736.59

If the annuity was an annuity due:

The correct answer is $ 54.56

Annuity = $ 20,000 / (27.1521x 1.08) = $ 682.03

The deposit would change by $ ( 736.59 - 682.03) = $ 54.56

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