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15 August, 14:37

What is the amount of the payments that Ned Winslow must make at the end of each of 8 years to accumulate a fund of $90,000 by the end of the 8th year, if the fund earns 8% interest, compounded annually

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  1. 15 August, 14:42
    0
    Amount to be paid annually by Ned Winslow = $8461.35

    Explanation:

    Fv = A (1 + r) ∧n - 1

    r

    90,000 = A (1 + 0.08) ∧8 - 1

    0.08

    90,000 = A (1.8509 - 1)

    0.08

    90,000 = 10.6366A

    A = 90,000/10.6366

    = $8,461.35
  2. 15 August, 14:48
    0
    The amount is $8,461.33

    Explanation:

    Using the formula future value for an annuity:

    FV = Annuity * Interest factor

    From the scenario under study, we are basically looking for our annuity - a specific payments made at constant intervals.

    It is thus believed that the annuity will be sustained to build up a fund of $90,000. This thus represents our Future Value of an annuity.

    Using the formula so enlisted:

    Remember, our interest is 8% compounded annually. It is important to obtain our interest factor using the annuity table.

    From the annuity table, our interest factor is 10.63663

    Hence, FV = n * interest factor

    90,000 = n * 10.63663

    N = 90,000/10.63663

    N = $8,461.326 (where N represents the annuity)
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