Question

How much must be deposited at the beginning of each year in an account that pays 4%, compounded annually, so that the account will contain $36,000 at the end of 9 years? (Round your answer to the nearest cent.)

Answer 1

Answer:

Annual deposit= $3,270.91

Explanation:

Giving the following information:

Deposit= beginning of the year

Interest rate= 4% compounded annually

Final value= $36,000

Number of years= 9

To calculate the annual deposit, we need to use the following formula:

FV=  {A*[(1+i)^n-1]}/i + {[A*(1+i)^n]-A}

A= annual deposit

Isolating A:

A= {(FV*i)/ {[(1+i)^n] - 1]} / (1+i)

A= {(36,000*0.04)/ [(1.04^9)-1]} / 1.04

A= $3,270.91