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How much would you need to deposit now in a savings account that earns 5% interest, compounded annually, in order to withdraw $5,000 at the end of every year for ten years

User ISkore
by
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1 Answer

4 votes

Answer:

the amount needed to deposit is $38,608.67

Step-by-step explanation:

The computation of the amount needed to deposit is as follows:

As we know that

Present value of annuity = Annuity × [1 ( 1 + interest rate)^-time period] ÷ rate

= $5,000 × [1 - (1.05)-10] ÷ 0.05

= $5,000 × 7.721734929

= $38,608.67

hence, the amount needed to deposit is $38,608.67

We simply applied the above formula so that the correct value could come

And, the same is to be considered

User Nikhil Utane
by
8.2k points

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