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Chapter 6: Q11Q (page 301)

Question:The Kellys are planning for a retirement home. They estimate they will need $200,000 4 years from now to purchase this home. Assuming an interest rate of 10%, what amount must be deposited at the end of each of the 4 years to fund the home price? (Round to two decimal places.)

Short Answer

Expert verified

The amount to be deposited each year will be $43094

Step by step solution

01

Step-by-stem solutionStep 1

Future values of annuity refer to the total value of a series of recurring payments at some specific date in the future.

02

Step 2

Amountdepositedeachyear=AmountneededRate(futurevalueofanordinaryannuityat10%for4years)=2000004.64100=$43094

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Most popular questions from this chapter

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