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8 January, 06:00

Sara shouppe has invested $100,000 in an account at her local bank. the bank will pay her a constant amount each year for 6 years, starting one year from today, and the account's balance will be 0 at the end of the sixth year. if the bank has promised ms. shouppe a 10% return, how much will they have to pay him each year?

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  1. 8 January, 06:07
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    We can compute this using the Annual depreciation charge

    Use the formula:

    depreciationcharge = (Co-Cn) i/[ (1+i) ^n-1) ]

    where

    Co = initial amount = $100,000

    Cn - value after n years = $0

    n = life of account = 6

    i = interest rate=10%

    Sunstituting all the values, we will get,

    depreciation charge = $12960.74

    The bank will have to pay Sara shouppe $12960.74 for the investment of $100000 with 10% interest.
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