You know you will need $25,000 at the end of 5 years. How much would you have to deposit annually, starting at the end of the first year, into an account earning 10% to accumulate the needed amount?

A) $3,980
B) $4,095
C) $4,435
D) $4,973
E) $5,886

Question

Raziya Gunasheva · Accepted Answer

Final Answer : B, Explanation :  The formula to calculate the annual deposit needed to accumulate a certain amount at a certain interest rate over a certain number of years is:Annual deposit = (Future value / Present value factor) x (interest rate / Present value factor for annuity)Present value factor = (1 + interest rate)^(-number of years)Present value factor for annuity = [(1 + interest rate)^(-number of years) - 1] / interest ratePlugging in the given values, we get:Annual deposit = (25,000 / 0.6209) x (0.10 / 3.7908) = $4,095. Therefore, the best choice is (B).

You know you will need $25,000 at the end of 5 years. How much would you have to deposit annually, starting at the end of the first year, into an account earning 10% to accumulate the needed amount?

A) $3,980
B) $4,095
C) $4,435
D) $4,973
E) $5,886

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Learning Objectives

Related questions

You know you will need $25,000 at the end of 5 years. How much would you have to deposit annually, starting at the end of the first year, into an account earning 10% to accumulate the needed amount?A) $3,980B) $4,095C) $4,435D) $4,973E) $5,886

Definitions

Learning Objectives

Learning Objectives

Related questions

You know you will need $25,000 at the end of 5 years. How much would you have to deposit annually, starting at the end of the first year, into an account earning 10% to accumulate the needed amount?

A) $3,980
B) $4,095
C) $4,435
D) $4,973
E) $5,886