Suppose payments were made at the end of each quarter into an ordinary annuity earning interest at the rate of?
Suppose payments were made at the end of each quarter into an ordinary annuity earning interest at the rate of 9%/year compounded quarterly. If the future value of the annuity after 7 yr is $50,000, what was the size of each payment?
A = P((1+r)^n – 1)/r, or
P= Ar/((1+r)^n – 1)
A=$50,000, r = 0.09/4 = 0.0225, n = 4*7 = 28
plugging in,
P = 50,000*0.0225/(1.0225^28 – 1)
= $1301.26
—————–
Related posts: