1. Find Regular Deposit
(PMT Amount) C = ?
Interest Rate i = 10%, Time n = 5 Year, Future value FV = 6715.61,
Deposit Frequency = at the beginning (Annuity Due) of every Year (1/year)
for Future value of Annuity Due method
Solution:
`i=10%=0.1` per year (Interest rate)
`n=5` years (Number of periods)
`FV=6715.61` (Future value)
Now, Future value (Annuity Due) formula is
`FV_("Annuity Due")=C*[((1+i)^n-1)/(i)]*(1+i)`
`:.6715.61=C*[((1+0.1)^5-1)/(0.1)]*(1+0.1)`
`:.6715.61=C*[((1.1)^5-1)/(0.1)]*1.1`
`:.6715.61=C*[(1.6105-1)/(0.1)]*1.1`
`:.6715.61=C*[6.11]*1.1`
`:.C=6715.61/(6.11*1.1)`
`:.C=1000`
2. Find Regular Deposit
(PMT Amount) C = ?
Interest Rate i = 10%, Time n = 3 Year, Future value FV = 18205,
Deposit Frequency = at the beginning (Annuity Due) of every Year (1/year)
for Future value of Annuity Due method
Solution:
`i=10%=0.1` per year (Interest rate)
`n=3` years (Number of periods)
`FV=18205` (Future value)
Now, Future value (Annuity Due) formula is
`FV_("Annuity Due")=C*[((1+i)^n-1)/(i)]*(1+i)`
`:.18205=C*[((1+0.1)^3-1)/(0.1)]*(1+0.1)`
`:.18205=C*[((1.1)^3-1)/(0.1)]*1.1`
`:.18205=C*[(1.331-1)/(0.1)]*1.1`
`:.18205=C*[3.31]*1.1`
`:.C=18205/(3.31*1.1)`
`:.C=5000`
This material is intended as a summary. Use your textbook for detail explanation.
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