Question

1. How much money must they pay into an account at the beginning of each of the next 20 years in order to have $10,000 at the end of the 20^th year? Assume that the account pays 10% per annum.

Answer 1

Information given:

Future (FV)= $10,000

Interest rate= 10%

Time period= 20 years

The question is concerning finding the yearly payments of an annuity due. Annuity due refers to annuity that occurs at the beginning of a period.

The financial calculator is set in the end mode. Annuity due is calculated by setting the calculator to the beginning mode (BGN). To do this, press 2^nd BGN 2^nd SET on the Texas BA II Plus calculator.

It is solved by inputting the below in the financial calculator:

FV= 10,000; I/Y= 10; N=20

Press CPT and PMT to compute the annuity due.

The annuity due is $158.72.

Therefore, $158.72 has to be put into an account for the next 20 years to have $10,000 at the end of the 20^th year.