Question

Question #2 – Annuity Payment

James is saving money to open a corner store. He needs $15,000 in two years to make his down payment and is investing in an annuity yielding an annual interest rate of 7% compounded monthly. If the annuity requires that James make monthly investments, what annuity payment must James make to save $15,000?

Make sure your final answer is clear and visible.
Must be in word document form.

Answer 1

The formula to find the monthly annuity is given by:

where,

• P_N is the balance in the account after N years.
• d is the regular deposit (the amount you deposit each year, each month, etc.)
• r is the annual interest rate in decimal form.
• k is the number of compounding periods in one year.

Here,

P_N=$15,000

r=7%=0.07

K=12

N=2

d=?

putting in above formula,

so,The annuity payment James has to make is $584.1098 Answer.