Annuity question

Question

How much would you need to deposit in an account each month in order to have $10000 in the account in 9 years? Assume the account earns 5% interest.

Answer 1

You are looking for the monthly rent of an ordinary annuity whose future value is $10,000. The relevant variables are:

 

PV = 0

PMT = ?

FV = 10,000

N = 9 * 12 = 108 months

i% = 5% / 12 = .416667%

 

A financial calculator solves this easily, but you still have to understand annuities and compound interst. Or you can use a formula or a spreadsheet function, or an annuity table.

 

the answer is $73.51