Find the lump sum deposited today that will yield the same total amount as this yearly payment (made at the end of each year for

Question

3 years ago

7

20 years at the given interest rate, compounded annually).

1 answer:

Oduvanchick [21] · Answer 1 · 2022-04-11T19:56:37+03:00

Answer:

$129,108.10

Explanation:

Missing word <em>"$9500 at 4%"</em>

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Present Value of the amount to be deposited P = ?

Annual Year end payment A = $9,500

Rate of interest r = 4% compounded annually

Period of payment n = 20 years

P = A * [1- (1/(1+r)^n)] / r

P = $9500 * [1 - (1/(1+0.04)^20)] / 0.04

P = $9500 * [1-(1/(1.04)^20)] / 0.04

P = $9500 * [1 - (1/2.191123143)] / 0.04

P = $9500 [1 - 0.45638695] / 0.04

P = $9500 * 0.5436131 / 0.04

P = $9500 * 13.590326

P = $129,108.1003

P = $129,108.10

So, the lump sum deposited today is $129,108.10.