Question

You would like to have $100,000 in ten years. You plan to make six equal deposits at the end of each of the six first years in an account that pays 8%. No additional deposits are made. What amount that must be deposit each year is most nearly:

a) $8,590

b) $9,995

c) $10,050

d) $12,120

Answer 1

You will deposit 'A' amount at the end of each of the six first years in an account that pays 8% and
then the account is left to get the funds accumulated for next four years. Then the amount in the
account should be $100,000 . This is also implies that My funds would be 100000(P/F, 8%, 10) now
and I make 6 equal annual payments towards this. This implies
100,000(P/F, 8%, 10) = A(P/A, 8%, 6)
100000*0.46319 = A*4.62288
A = 100000*0.46319/4.62288 = 10,019
Closest option is C).