Question

Unfortunately, Tori doesn't have enough money in her account right now. She needs to make additional contributions at the end of each of the next five years to be able to pay for the repairs. Her account currently has $3,500, which, along with her additional contributions, is expected to continue earning 8% annual interest. If she makes equal contributions each year, how large must each contribution be for Tori to have $8,000 after five years?

Answer 1

Step-by-step explanation:

formula:

FV=P(1+r/100)^n

FV=future value

P=present value

r=rate of interest

n=time period

8000=4500(1+8/100)^4+P(1+8/100)^3+P(1+8/100)^2+P(1+8/100)+P

P=each contribution amount

8000=6122.20+P[(1.08)^3+(1.08)^2+(1.08)+1]

P=[8000-6122.20]/[(1.08)^3+(1.08)^2+(1.08)+1]

=$417