Jerry Rockness needs $40,000 to pay off a loan due on December 31, 2025. His pla

Question

Jerry Rockness needs $40,000 to pay off a loan due on December 31, 2025. His plans included the making of 10 annual deposits beginning on December 31, 2016, in accumulating a fund to pay off the loan. Without making a precise calculation, Jerry made 3 annual deposits of $4,000 each on December 31, 2016, 2017, and 2018, which have been earning interest at 10% compounded annually.

Required:

What is the equal amount of each of the next 7 deposits for the period December 31, 2019, to December 31, 2025, to reach the fund objective, assuming that the fund will continue to earn interest at 10% compounded annually?

Explanation / Answer

Calculation of the Annual Amount Future Value = Present Value ( 1+r)n 40000= 4000*3.6 + x*10.29 10.29x = 40000-14400 X =25600/10.29 X 2487.852 Amount per year should be $ 2500 approximately

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