You want to have $32,000 in your savings account ten years from now, and you’re prepared to make

You want to have $32,000 in your savings account ten years from now, and you’re prepared to make equal annual deposits into the account at the end of each year.

Required:

If the account pays 6.50 percent interest, what amount must you deposit each year? (Do not include the dollar sign ($). Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Amount to be deposit

$

rev: 04-30-2011

Explanation:

Here we have the FVA, the length of the annuity, and the interest rate. We want to calculate the annuity payment. Using the FVA equation:

FVA = C{[(1 + r)t – 1] / r}

$32,000 = C[(1.065010 – 1) / 0.0650]

We can now solve this equation for the annuity payment. Doing so, we get:

C = $32,000 / 13.49442

C = $2,371.35

Calculator Solution:

Note: Intermediate answers are shown below as rounded, but the full answer was used to complete the calculation.

Enter

10

6.50%

±$32,000

N

I/Y

PV

PMT

FV

Solve for

$2,371.35