Determine the periodic deposit

Question

Determine the periodic deposit. Round up to the nearest dollar. How much of the financial goal comes from deposits and how much comes from interest?


Periodic Deposit: $? at the end of every three months
Rate: 4.25% compounded quarterly
Time: 5 years
Financial Goal: $70,000

$3496; $69,920 from deposits and $80 from interest

$2351; $47,020 from deposits and $22,980 from interest

$3160; $63,200 from deposits and $6800 from interest

$3764; $37,640 from deposits and $32,360 from interest

Answer 1

Future Value of Annuity = PMT *  [(1+.0425/4)^4*5-1]*(1/.0425/4) = PMT * 22.15346

 

$70,000 / 22.15346 = PMT = $3160

 

PMT = $3160

 

PMT * 20 (total number of payments) = 63200 

 

Future Value less total number of payments = amount of interest

 

70,000 less 63200 = 6800

 

Answer is:

 

PMT = $3160;

 

$70,000 is composed of $63,200 from deposits and $6800 from interest