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Six engineering students have an idea for a new product that they plan to launch in 3 years after graduation. In three years, each engineer will need $7,500 to begin the venture. How much should be invested by each student each year if the interest rate is 6%

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facundobuzzetti

Answer:

Annual deposit= $2,355.82

Explanation:

Giving the following information:

Number of periods (n)= 3 years

Future Value (FV)= $7,500

Interest rate (i)= 6%

To calculate the annual deposit, 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= (7,500*0.06) / [(1.06^3) - 1]

A= $2,355.82

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