Answer:
To calculate how much you would have to deposit today to accumulate the same amount of money that $75 monthly payments at a rate of 3.5% compounding monthly for 10 years in an annuity would earn, we can use the formula for the present value of an annuity due:
PV = PMT × ((1 - (1 + r/n)^(-n×t)) / (r/n)) × (1 + r/n)
where:
- PV is the present value of the annuity due (the amount you would have to deposit today)
- PMT is the monthly payment ($75)
- r is the annual interest rate (3.5%)
- n is the number of times interest is compounded per year (12 for monthly compounding)
- t is the number of years (10)
PV = 75 × ((1 - (1 + 0.035/12)^(-12×10)) / (0.035/12)) × (1 + 0.035/12) = **$7,360.47**
Therefore, you would have to deposit **$7,360.47** today to accumulate the same amount of money that $75 monthly payments at a rate of 3.5% compounding monthly for 10 years in an annuity would earn.