Question

Suppose you need to have $52,786.00 in an account 25.00 years from today and that the account pays 5.00%. How much do you have to deposit into the account 6.00 years from today?

Answer 1

Answer:

Amount to be deposited 6 years from now will be $20,889.21

Explanation:

Future value = $52,786.00

Time for which the interest will be provided, n = 25 - 6 years

= 19 years

Interest rate paid in the account = 5% = 0.05

Now,

Using the compounding formula

Future value = Amount deposited × (1 + rate )ⁿ

thus,

$52,786.00 = Amount deposited × (1 + 0.05)¹⁹

or

$52,786.00 = Amount deposited × 2.527

or

Amount deposited = $20,889.21

Hence,

Amount to be deposited 6 years from now will be $20,889.21