Tough Concrete, a construction company, will purchase a new kind of digging machine in 3 years. They anticipate that the new digging machine will cost them $3,700. Since they would like to have cash ready for payment, how much should they deposit semi-annually in an account that will earn 3% per year compounded semi-annually to have the money available in 3 years?

Annual deposit = $593.94

Explanation:

Giving the following information:

They anticipate that the new digging machine will cost them $3,700. Since they would like to have cash ready for payment, how much should they deposit semi-annually in an account that will earn 3% per year compounded semi-annually to have the money available in 3 years?

FV = {A*[ (1+i) ^n-1]}/i

A = annual deposit

Isolating A:

A = (FV*i) / {[ (1+i) ^n]-1}

A = (3,700*0.015) / { (1.015^6) - 1} = 593.94