Question

Janice would like to send her parents on a cruise for their 25th wedding anniversary. she has priced the cruise at $15,000 and she has 5 years to accumulate this money. to the nearest dollar, how much must janice deposit annually in an account paying interest of 10 per cent per annum compounded annually in order to have enough money to send her parents on the cruise, assuming the first deposit is to be made one year from now?

a. $2,457
b. $1,862
c. $3,000
d. $2,234

Answer 1

Janice needs to annually deposit approximately $2,234 into an account with a 10% interest rate compounded annually to have $15,000 in 5 years for her parents' cruise.

Step-by-step explanation:

The question asks how much Janice must deposit annually into an account with a 10% interest rate compounded annually to accumulate $15,000 in 5 years. To solve this, we can use the future value of an annuity formula FV = P * (((1 + r)^n - 1) / r), where FV is the future value, P is the annual payment, r is the interest rate per period, and n is the number of periods.

Solving for P, we have P = FV / (((1 + r)^n - 1) / r). Substituting the given values, P = 15,000 / (((1 + 0.10)^5 - 1) / 0.10). Doing the calculations, Janice needs to deposit approximately $2,234 each year.

Thus, the answer to how much Janice must deposit annually is $2,234.