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Zheng sen wishes to accumulate​ $1 million by the end of 20 years by making equal annual endminus−ofminus−year deposits over the next 20 years. if zheng sen can earn 10 percent on his​ investments, how much must he deposit at the end of each​ year?

1 Answer

4 votes
$17,459.62
The equation for the value of an investment with periodic contributions is:
B = P(1+r)^y + c(((1+r)^y -1)/r)
where
B = Balance
P = Initial principle
r = interest rate
c = periodic contribution
y = number of years.

For this problem, the initial principle is 0, so we have a simplified equation of:
B = c(((1+r)^y -1)/r)

Let's solve for c, substitute the known values, and calculate
B = c(((1+r)^y -1)/r)
B/(((1+r)^y -1)/r) = c
1000000/(((1+0.10)^20 -1)/0.10) = c
1000000/(((1.10)^20 -1)/0.10) = c
1000000/((6.727499949 -1)/0.10) = c
1000000/(5.727499949/0.10) = c
1000000/57.27499949 = c
17459.62477 = c
So Zheng needs to contribute $17,459.62 at the end of every year.
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