Question

Scott wants to accumulate $3,800 over a period of 11 years so that a cash payment can be made for roof maintenance on his summer cottage. To have this amount when it is needed, he will make annual deposits at the end of each year into a savings account that earns 7.0% annual interest per year. How much must each annual deposit be

Answer 1

$240.76

Step-by-step explanation:

The formula to determine the annual deposit is :

p = FV / annuity factor

Annuity factor = {[(1+r)^n] - 1} / r

FV = Future value

P = Present value

R = interest rate

N = number of years

Annuity factor = (1.07^11 - 1) / 0.07 = 15.783599

p = $3800 / 15.783599 = $240.76