Question

How much money must you pay into an account at the end of each of 15 years in order to have $150,000 at the end of the 15th year? Assume that the account pays 6% per year

Answer 1

Money required at the end of term = $150,000
Term = 15 years
Compounding rate = 6%
Opening value = 0

To find, the amount that needs to be paid at the end of each year to have an amount of $150,000 at the end of 15 years.

This question is related to the Time Value of Money and the function that needs to be used is of 'PMT'.

Therefore, if $6,444.41 is deposited into an account that gives 6% every year then the amount of $6,441.41 will compound at 6% until the end of the 15th year and give the investor a sum of $150,000.

NOTE: Excel formula used has been shown in the figure.