You need $28,974 at the end of 10 years, and your only investment outlet is an 8 percent long-term certificate of deposit (compounded annually). With the certificate of deposit, you make an initial investment at the beginning of the first year.

1. What single payment could be made at the beginning of the first year to achieve this objective?

2. What amount could you pay at the end of each year annually for 10 years to achieve this same objective?

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What do you think the answer is?

Quote:

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Originally Posted by ICgurly3

You need $28,974 at the end of 10 years, and your only investment outlet is an 8 percent long-term certificate of deposit (compounded annually). With the certificate of deposit, you make an initial investment at the beginning of the first year.

1. What single payment could be made at the beginning of the first year to achieve this objective?

2. What amount could you pay at the end of each year annually for 10 years to achieve this same objective?

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You need $28,974 at the end of 10 years, and your only investment outlet is an 8 percent long-term certificate of deposit (compounded annually). With the certificate of deposit, you make an initial investment at the beginning of the first year.

1. What single payment could be made at the beginning of the first year to achieve this objective?

28,974= N x 10 years X 8%
10 years 10 years

= 2,897.40= N X 8% = $362.18

2. What amount could you pay at the end of each year annually for 10 years to achieve this same objective?

362.18 X 12 (months in the year) = $4,346.16