Amount of the equal annual deposit


Problem: Astros Co wants to accumulate $2,000,000 by 10/1/10. To achieve this goal, Astros Co will make the first of 6 equal annual deposits on 10/1/05. The deposits will be placed into a fund that earns interest at 10%

Compute the:

1) amount of the equal annual deposit

2) balance of the account at 10/1/08, immediately after the 4th deposit

3) amount of increase in the balance of the account from 10/1/07 to 10/1/08

4) amount of interest earned from 10/1/06 through 10/1/08

On 10/1/08, after making 4 deposits for the amount determined in (1), Astros Co discovers that the amount needed will be $1,500,000 instead of $2,000,000. However, the $1,500,000 will not be needed until 10/1/13. So, Astros Co will not be required to make the remaining 2 deposits computed in (1) and instead will be allowed to make a single withdrawal on 10/1/11

Compute the:

5) balance of the account on 10/1/10

6) amount of the withdrawal made on 10/1/11

7) amount of interest earned from 10/1/10 through 10/1/12

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Finance Basics: Amount of the equal annual deposit
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