Time-Value-Money, reaching a financial goal.

Business & Finance
Tutor: None Selected Time limit: 1 Day

Six years from today you need $10,000. You plan to deposit $1,500 annually, with the first payment to be made a year from today, in an account that pays an 8% effective annual rate. Your last deposit, which will occur at the end of Year 6, will be for less than $1,500 if less is needed to reach $10,000. How large will your last payment be?

Sep 27th, 2015

Thank you for the opportunity to help you with your question!

Future value of ordinary annuity $1500 x (1+.08)^5-1/.08 = 1500 x 5.8666 = $8,799.90 is the value at the end of year 5

$8,799.90 x 1.08 = $9,503.89 is the value before the last payment

$10,000-$9,503.89 = $496.11 is the amount of your last payment at end of year 6.

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Sep 27th, 2015

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