You would like to have $50,000 in 15 years. To accumulate this amount, you plan to deposit
Question:
You would like to have $50,000 in 15 years. To accumulate this amount, you plan to deposit an equal sum in the bank each year that will earn 7 percent interest compounded annually. Your first payment will be made at the end of the year.
a. How much must you deposit annually to accumulate this amount?
b. If you decide to make a large lump-sum deposit today instead of the annual deposits, how large should this lump-sum deposit be? (Assume you can earn 7 percent on this deposit.)
c. At the end of five years, you will receive $10,000 and deposit this in the bank toward your goal of $50,000 at the end of 15 years. In addition to this deposit, how much must you deposit in equal annual deposits to reach your goal? (Again, assume you can earn 7 percent on this deposit.)
Step by Step Answer:
Financial Management Principles and Applications
ISBN: 978-0133423822
12th edition
Authors: Sheridan Titman, Arthur Keown, John Martin