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?

Question

Rufus

Business

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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Lawson Archer · Answer 1

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.