Question

Two payments of $1,800 each are desired in Year 9 and 10. To be able to pay off this payment, four equal amounts will be deposited in a bank in years 3 through n=6 at an interest rate (i) of 13% per year. Determine the value of the equal amount that should be deposited in a bank in Year 3 to Year 6.

Answer 1

SOL .

PMT = 1800
RATE = 13 %
N = 2
PV = 1800 / (1+r)+1800/(1+r)²
= 3002.58


FV = 3002.58
N = 2
RATE = 13%
PV = 3002.58 / (1+r)²
= 2351.46



FV = 2351.46
RATE = 13%
N = 4
FV Annuity Factor
=[ (1+r)n -1 ]/r
=[(1.13)⁴ -1 ] / 0.13
=4.8497



FV = X * FV Annuity Factor
2351.46 = X * 4.8497
2351.46/ 4.8497 = X
484.85 = X


Value of the equal amount that should be deposited in a bank in Year 3 to Year 6 is 484.85

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