Answer:
Annual deposit= $5,599.42
Explanation:
<u>First, we need to calculate the total future value required when Seth is 18.</u>
FV= PV*(1+i)^n
FV18= 25,000*1.06^18= $71,358.48
FV19= 71,358.48*1.06= $75,639.99
FV20= 75,639.99*1.06= $80,178.39
FV21= 80,178.39*1.06= 84,989.09
Total FV= $312,165.95
<u>Now, we can calculate the annual deposit:</u>
FV= {A*[(1+i)^n-1]}/i
A= annual deposit
Isolating A:
A= (FV*i)/{[(1+i)^n]-1}
A= (312,165.95*0.12) / [(1.12^18) - 1]
A= $5,599.42
