question archive Nu-Tools plans to set aside an equal amount of money each year, starting today, so that it will have $25,000 saved at the end of three years
Nu-Tools plans to set aside an equal amount of money each year, starting today, so that it will have $25,000 saved at the end of three years
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Nu-Tools plans to set aside an equal amount of money each year, starting today, so that it will have $25,000 saved at the end of three years. If the firm can earn 4.7 percent, how much does it have to save annually?
$8.004 67
$25,000
$8, 333.33
$7.689.16
$7, 596.61
$8, 414.14
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Answer:
| Amount set aside each year (P) | (FVAD×r)÷((1+r)×[(1+r)^n-1]) | |
| Here, | ||
| 1 | Interest rate per annum | 4.70% |
| 2 | Number of years | 3 |
| 3 | Number of compoundings per per annum | 1 |
| 4 = 1÷3 | Interest rate per period ( r) | 4.70% |
| 5 = 2×3 | Number of periods (n) | 3 |
| Future value of annuity due (FVAD) | $ 25,000 | |
| Amount set aside each year (P) | $ 7,596.61 | |
| 25000×4.70%)÷((1+4.70%)×((1+4.70%)^3-1)) |
