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A. Use the appropriate formula to determine the periodic deposit.

b. How much of the financial goal comes from deposits and how much comes from interest?

Options:
A) The periodic deposit is $18,947, all from deposits.
B) The periodic deposit is $18,947, all from interest.
C) The periodic deposit is $10,000, with equal parts from deposits and interest.
D) The periodic deposit is $9,000, with most from deposits.

User Swcool
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1 Answer

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Final answer:

The periodic deposit needed to achieve a financial goal of $10,000 in ten years with a 10% annual compound interest is $627.41. None of the provided options correctly matches this calculation.

Step-by-step explanation:

To determine the periodic deposit required to achieve a financial goal of having $10,000 in ten years with an interest rate of 10% compounded annually, we need to use the formula for the future value of an annuity:


FV = P × {[(1 + r)^n - 1] / r}

Where FV is the future value, P is the periodic deposit, r is the interest rate per period, and n is the number of periods.

For a future value (FV) of $10,000, an interest rate (r) of 10% or 0.10, and a ten-year period (n) of 10, we can solve for P (the periodic deposit).

Let's plug the given values into the formula:

$10,000 = P × {[(1 + 0.10)^10 - 1] / 0.10}

Solving for P gives us:

P = $10,000 / {[(1 + 0.10)^10 - 1] / 0.10} = $10,000 / 15.937 = $627.41

Therefore, the periodic deposit needed is $627.41. Since the options provided don't match this result, it seems there might be a typo or mistake in the question or provided options.

User Damon Drake
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7.8k points