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Holly wants to have $50,000 available in year 2025. Holly plans to make annual deposits into...

Holly wants to have $50,000 available in year 2025. Holly plans to make annual deposits into an account paying 6% in years 2020 through 2023. What size annual deposits does Holly need to make to accomplish her goal?
please explain great detail

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Answer #1

The amount is computed as shown below:

Present value of $ 50,000 in year 2023 will be as follows:

= $ 50,000 / 1.062

= $ 44,499.822

This will become our future value in the equation as presented below:

Future value = Annual deposits x [ [ (1 + r)n – 1 ] / r ]

$ 44,499.822 = Annual deposits x [ [ (1 + 0.06)4 - 1 ] / 0.06 ]

$ 44,499.822 = Annual deposits x 4.374616

Annual deposits = $ 44,499.822 / 4.374616

Annual deposits = $ 10,172.28 Approximately

Feel free to ask in case of any query relating to this question      

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