In: Finance
You need to accumulate $10,000. To do so, you plan to make deposits of $1,200 per year - with the first payment being made a year from today - into a bank account that pays 7.6% annual interest. Your last deposit will be less than $1,200 if less is needed to round out to $10,000. How many years will it take you to reach your $10,000 goal? Round your answer up to the nearest whole number.
How large will the last deposit be? Round your answer to the
nearest cent.
Total investment to be needed = $ 10,000
Investment of $1200 will be made at the end of each year.
Interest rate received = 7.6%
Interest received in current year will be calculated on basis of Total deposit of previous year.
For example- interest received in year 3 will be = 0.076 *Total deposit of year 2
= 0.076 * 2491.2 = $189.3312 (as on current year deposit of $1200 no interest will be provided as it is made at the end of the year)
Year |
Deposited (this year) $ |
Interest Received in current year $ |
Total Deposit (in $) = total deposit accumulated from last year + deposit this year + interest received |
0 | 0 | 0 | 0 |
1 | 1200 | 0 | 1200 |
2 | 1200 | 91.2 | 2491.2 |
3 | 1200 | 189.3312 | 3880.5312 |
4 | 1200 | 294.9203712 | 5375.451571 |
5 | 1200 | 408.5343194 | 6983.985891 |
6 | 1200 | 530.7829277 | 8714.768818 |
7 | 622.9087515 | 662.3224302 | 10000 |
Total 7 years it will take you to reach your $10,000 goal.
Last deposit will be of $ 623 (approx)
Hope it helps!