Question

How much do you need to deposit today (P) to withdraw $25,000 at n =1, $3,000 at n = 2, and $5,000 at n =4, if your account earns 10%

a) Find annual interest

b) Find A

Answer 1

Answer : a.) Annual Interest = 10%

b.)A = $ 28622

Calculation and Explanation

To calculate annual Interest we need to first calculate A

Amount deposited can be calculated by discounting Payment using 10% as discount ratein various years(n)

Amount Deposited 'A' = [ 25000 /(1.10)1 ] + [3000 / (1.10)2] + [ 5000 / (1.10)4]

= 22727.2727 + 2479.33884 + 3415.06728

= 28621.68 or $ 28622

Therefore Annual Interest = 10%

Number of year(n)	Beginning Balance	Interest Earned @10%	Amount Deposited	Balance at the end
0	0	0	28622	28622
1	28622	2862.20	(25000)	6484.20
2	6484.20	648.42	(3000)	4132.62
3	4132.62	413.262		4545.882
4	4545.882	454.5882	(5000)	0