Serge M. answered • 12/19/16

Tutor

5
(11)
Professor of Accounting, retired. Ph.D., CPA

We are dealing with the future value of an ordinary annuity. You can lookup the formula and solve for the payment, or you can use a spreadsheet function or financial calculator. the simplest approach is a financial calculator, but you have to understand compound interest and annuities. The variables are

PV = 0

FV = 800,000

N = 40 years = 480 months

i% = 5.3% = .441667%

PMT = ?

PMT = $482.40

For 20 years, PMT - $1,871.52 per month

PV = 0

FV = ?

N = 10 years = 120 months

i% = 4.8% = .4%

PMT = 1,871.52

FV = $296,631.79

The important point is to define the four known variables and solve for the unknown. You have to interpret the problem carefully.

Jessica J.

12/19/16