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Use the Present Value of an Annuity Due

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The Ajax Co. just decided to save $1,500 a month for the next five years as a safety net for recessionary periods. The money will be set aside in a separate savings account which pays 3.25% interest compounded monthly. It deposits the first $1,500 today. If the company had wanted to deposit an equivalent lump sum today, how much would it have had to deposit?

a. $82,964.59
b. $83,189.29
c. $83,428.87
d. $83,687.23
e. $84,998.01

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The solution to finding out how much a company would have to deposit to get an equal value is shown. All formulas and calculations are attached.

$2.19