1. Find Regular Deposit
(PMT Amount) C = ?
Interest Rate i = 10%, Time n = 5 Year, Future value FV = 6105.1,
Deposit Frequency = at the end (Ordinary Annuity) of every Year (1/year)
for Future value of Annuity method
Solution:
`i=10%=0.1` per year (Interest rate)
`n=5` years (Number of periods)
`FV=6105.1` (Future value)
Now, Future value (Ordinary Annuity) formula is
`FV_("Ordinary Annuity")=C*[((1+i)^n-1)/(i)]`
`:.6105.1=C*[((1+0.1)^5-1)/(0.1)]`
`:.6105.1=C*[((1.1)^5-1)/(0.1)]`
`:.6105.1=C*[(1.6105-1)/(0.1)]`
`:.6105.1=C*[6.11]`
`:.C=6105.1/(6.11)`
`:.C=1000`
2. Find Regular Deposit
(PMT Amount) C = ?
Interest Rate i = 10%, Time n = 3 Year, Future value FV = 16550,
Deposit Frequency = at the end (Ordinary Annuity) of every Year (1/year)
for Future value of Annuity method
Solution:
`i=10%=0.1` per year (Interest rate)
`n=3` years (Number of periods)
`FV=16550` (Future value)
Now, Future value (Ordinary Annuity) formula is
`FV_("Ordinary Annuity")=C*[((1+i)^n-1)/(i)]`
`:.16550=C*[((1+0.1)^3-1)/(0.1)]`
`:.16550=C*[((1.1)^3-1)/(0.1)]`
`:.16550=C*[(1.331-1)/(0.1)]`
`:.16550=C*[3.31]`
`:.C=16550/(3.31)`
`:.C=5000`
This material is intended as a summary. Use your textbook for detail explanation.
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