1. Find Regular Deposit
(PMT Amount) C = ?
Interest Rate i = 10%, Time n = 5 Year, Present value PV = 3790.79,
Deposit Frequency = at the end (Ordinary Annuity) of every Year (1/year)
for Present value of Annuity method
Solution:
`i=10%=0.1` per year (Interest rate)
`n=5` years (Number of periods)
`PV=3790.79` (Present value)
Now, Present value (Ordinary Annuity) formula is
`PV_("Ordinary Annuity")=C*[(1-(1+i)^(-n))/(i)]`
`:.3790.79=C*[(1-(1+0.1)^-5)/(0.1)]`
`:.3790.79=C*[(1-(1.1)^-5)/(0.1)]`
`:.3790.79=C*[(1-0.6209)/(0.1)]`
`:.3790.79=C*[3.79]`
`:.C=3790.79/(3.79)`
`:.C=1000`
2. Find Regular Deposit
(PMT Amount) C = ?
Interest Rate i = 10%, Time n = 3 Year, Present value PV = 12434.26,
Deposit Frequency = at the end (Ordinary Annuity) of every Year (1/year)
for Present value of Annuity method
Solution:
`i=10%=0.1` per year (Interest rate)
`n=3` years (Number of periods)
`PV=12434.26` (Present value)
Now, Present value (Ordinary Annuity) formula is
`PV_("Ordinary Annuity")=C*[(1-(1+i)^(-n))/(i)]`
`:.12434.26=C*[(1-(1+0.1)^-3)/(0.1)]`
`:.12434.26=C*[(1-(1.1)^-3)/(0.1)]`
`:.12434.26=C*[(1-0.7513)/(0.1)]`
`:.12434.26=C*[2.49]`
`:.C=12434.26/(2.49)`
`:.C=5000`
This material is intended as a summary. Use your textbook for detail explanation.
Any bug, improvement, feedback then
