Question

Barry cuda would like to save $210,000 over the next 20 years. he will assume that his account will earn 6% annually. if barry decides to make annual end of year deposits, how much would he need to deposit annually?

Answer 1

To get the annual deposit we will use the formula
Amortization = [f(r(1+r)n]/(1+r)^n-1)\
where
F= future amount = $210000
r = interest rate = 6%/annum
n= number of payments =20
substitute the values we will solvefor Amortization
Amortization = $18308.76

Barry Cuda would need to pay $18308.76 annually to get $210,000 in the 20th year.