Question

You need to accumulate $10,000. To do so, you plan to make deposits of $2,000 per year - with the first payment being made a year from today - into a bank account that pays 8.66% annual interest. Your last deposit will be less than $2,000 if less is needed to round out to $10,000. How many years will it take you to reach your $10,000 goal? Round your answer up to the nearest whole number. How Large will the last deposit be? Round your anwser to the nearest cent.

Answer 1

We have calculated the figures in the columns i.e."Value at the end of 2st Year" , "Value at the end of 3rd Year" using simple compounding formula

A = P x [ ( 1 + (r/100) ) ^n ]
Where
A = Final Amount
P = Principal Value or Amount Invested
r = Rate of interest
n = Time period of compounding

Thus e.g. A = $2000 x [ ( 1 + (8.66/100) ) ^1 ] for calculating Value of the $2000 invested at the end of 1st year compounded after 1 year i.e. its Value at the end of 2nd year
A = $2173.2