You want to have $90,000 in your savings account 10 years from now, and you're prepared to make...

Question:

You want to have $90,000 in your savings account 10 years from now, and you're prepared to make equal annual deposits into the account at the end of each year. If the account pays 6.8 percent interest, what amount you must deposit each year?

Future Value of annuity:

Future value of annuity is the future value of an equal annual or periodic payments to be received at some point in future. It depends on the amount of payment, the prevailing interest rate and the time period.

Answer and Explanation: 1

Future value of annuity can be calculated by the given formula:

{eq}FV= Payment(\frac{(1+r)^n-1}{r}) {/eq}

Here:

Payment has to be calculated.

FV=$90,000

r (rate)=6.80% or 0.068

n=10

Substituting the values we have:

90000=Payment((1+0.068)^10)-1)/0.068

90000=Payment *13.68622

Payment=90000/13.68622

=$6,575.77


Learn more about this topic:

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What is Annuity? - Definition & Formula

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Chapter 2 / Lesson 7
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Learn about annuities. Understand what an annuity is, examine the annuity formula and learn how to calculate its future value, and see examples of annuities.


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