Question

Please help I don’t understand

Answer 1

Answer:

  a) $5176 periodic deposit

  b) $98,344 comes from deposits; $31,656 comes from interest.

Step-by-step explanation:

a) A suitable annuity formula can tell you the deposit required to achieve a particular future value.

  FV = P((1+r)^n -1)/r

For a future value of FV from a periodic payment of m for n periods compounded at rate r per period.

Here, FV = $130,000, r = 0.03, n = 19, so the payment P is ...

  P = FV·r/((1+r)^n -1)

  P = $130,000(0.03)/(1.03^19 -1) ≈ 5176.80

The periodic deposit is $5176.

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b) So, 19 deposits of $5176 have a value of ...

  19 · $5176 = $98,344

This is the amount that comes from deposits.

The remaining amount, $130,000 -98,344 = $31,656, is the amount that comes from interest.