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Carla would like to have 230,000 saved in 8 years (at the end of year 8) to pay for a trip around the world. She plans to start saving in equal annual installment in two years from today and can earn 6.2% on her savings. How much must she invest each year to reach her goal.

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facundobuzzetti

Answer:

A= $32,807.72

Explanation:

Giving the following information:

Future value= $230,000

Number of periods= 6 years

Interest rate= 6.2%

To calculate the annual deposits, we need to use the following formula:

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

A= annual deposit

Isolating A:

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

A= (230,000*0.062) / [(1.062^6) - 1]

A= $32,807.72

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