Purchase Solution

Calculating the amount of annual deposits

Not what you're looking for?

Ask Custom Question

P1
Deposits to accumulate future sums. For each of the cases shown in the following table, determine the amount of equal, annual, end of year deposits necessary to accumulate the given sum at the end of specified period, assuming stated annual interest rate.
Case Sum to be Accumulation
Accumulated period (years) Interest Rate
A $5000 3 12%
B 100,000 20 7
C 30,000 8 10
D 15,000 12 8

P 2
Creating a retirement fund. To supplement your planned retirement in exactly 42 years, you estimate that you need to accumulate $220,000 by the end of 42 years from today. You plan to make equal, end-of-year deposits into an account paying 8% annual interest.
a. How large must the annual deposits be to create $220,000 fund by the end of 42 years?
b. If you can afford to deposit $600 per year into the account, how much will you have accumulated by the end of forty-second year?

Attachments
Purchase this Solution
Solution Summary

There are two problems. Solutions to these problems depict the steps to calculate equal, annual, year end deposits sufficient enough to meet the given target.

Solution Preview

Problem 1
Case A
Sum to be accumulated=S=$5000
Number of periods=n=3
Interest rate=i=12%
Periodic payment=R=?

We know that sum of ordinary annuity is given by
S=R/i*((1+i)^n-1)
5000=R/12%*((1+12%)^3-1)
5000=R/12%*(0.404928)
5000=3.3744R
R=5000/3.3744=$1481.75

Case B
Sum to be accumulated=S=$100000
Number of periods=n=20
Interest rate=i=7%
Periodic payment=R=?

We know that ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
Recent Feedback
  • "Thank you"
  • "Really great step by step solution"
  • "I had tried another service before Brain Mass and they pale in comparison. This was perfect."
  • "Thanks Again! This is totally a great service!"
  • "Thank you so much for your help!"
Purchase this Solution
Free BrainMass Quizzes
Cost Concepts: Analyzing Costs in Managerial Accounting

This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.

Learning Lean

This quiz will help you understand the basic concepts of Lean.

Organizational Leadership Quiz

This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.

Situational Leadership

This quiz will help you better understand Situational Leadership and its theories.

Production and cost theory

Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.

View More Free Quizzes
Related BrainMass Solutions

  • Calculating Equal Periodic Deposits

    278181 Calculating Equal Periodic Deposits You want to have $30,000 in your savings account eight years from now, and you're prepared to make equal annual deposits into the account at the end of each year.

  • Amount of the Equal Annual Deposit

    51745 Amount of the Equal Annual Deposit Astros Co wants to accumulate $2,000,000 by 10/1/10. To achieve this goal, Astros Co will make the first of 6 equal annual deposits on 10/1/05.

  • Annuities

    P=C*(1-1/(1+i)^n)/i $442561.77=C*(1-1/1.1^20)/0.1=C*8.51356 C=442561.77/8.51356=$51983.1391 Annual drawls =$51983.1391 The solution describes the steps for calculating equal annual withdrawal amount from the earlier accumulations.

  • Time Value of Money

    What rate should the shop report? What is the effective annual rate? 4) Calculating Loan Payments.

  • Calculating the desired amonut of investment

    502779 Calculating the desired amount of investment Jane Alexander currently has $6,750 in a money market account paying 6.35 percent annually. She plans to use this amount and her savings over the next 8 years to make a down payment on a house.

  • Time value of money

    The deposits are made at the end of each year into an account paying 5% annual interest. What amount will be in the sinking fund at the end of 10 years?

  • Future value of an ordinary annuity

    If he can earn an annual compound rate of 8 percent on his deposits, the amount in the account upon retirement will be 1. 1. $21,207. 2. 2. $91,524. 3. 3. $98,846. 4. 4. $19,636. 2.A generous benefactor to the local ballet plans to

  • UNO National Bank: Calculate Excess Reserves

    Calculate the bank's excess reserves (the requirement ratio 10% ). Show your work including any formulas. b. Suppose UNO National Bank makes a loan to a customer in the amount of its excess reserves.

  • Annuity (monthly deposits)

    If you expect to earn a return of 10% annually on your investments what will the amount of each of the monthly deposits? The solution calculates the value of Annuity (monthly deposits) to be able to cover expected expenses while in school.

  • Sinking Fund

    The amount in the sinking fund at the end of 10 years will be 80000 X 12.578=$1,006,240.00 The solution explains how to calculate the future value of a sinking find given annual deposits

View More Related Solutions