$50,000 by the end of 10 years making equal annual end-of-year deposits over the next 10 years.earn 5 percent on investments, how much deposit

Question

Xiao Li wishes to accumulate $50,000 by the end of 10 years by making equal annual end-of-year deposits over the next 10 years. If Xiao Li can earn 5 percent on her investments, how much must she deposit at the end of each year?

Answer 1

To accumulate 50,000 set x as the principal for ten years as a geometric series where the first term is x and the final term is x*(1+.05)^10. Then the sum is x(1-1.05^10)/(1-1.05)=50000. Solve for x.

 

Hope that helps,

Deanna