BUSINESS MATH: HELP STUCK

Question

Linda needs to have an annuity payment of $200, at the beginning of each year for 17 years. How much should she deposit now at 11% interest, compounded annually, to yield this payment?

Answer 1

Hello, Angela! I am more than happy to help you with this problem. This problem is an example of a compound interest problem. The formula for compound interest is A = P(1+ r/n)^nt, where represents the amount, p represents the principal (initial amount), r represents the rate in decimal form, n represents the number of times per year that the current value compounds, and t represents the time. The amount is $200, the rate is .11, and n is 1. Therefore, 200 = P(1+.11)

200 = 1.11P

1.11 1.11

P is approximately $180.18.