Zendor Company wants to have $200,000 available in August 2021 to make an equipment purchase.To be able to have this amount available,Zendor will make equal annual deposits in an investment account earning 12% annually in June 2017,2018,2019,2020,and 2021.What is the dollar amount that must be deposited each of those years to achieve this objective?
A)$22,700
B)$31,480
C)$40,000
D)$55,480

Question

Quizplus · Accepted Answer

We can use the formula for the future value of an annuity to solve this problem. FV = PMT x [(1 + i)^n -1]/i, where FV is the future value, PMT is the annual deposit, i is the interest rate per period, and n is the number of periods. Plugging in the given values, we get: 
$200,000 = PMT x [(1 + 0.12)^5 - 1]/0.12 
Solving for PMT, we get: 
PMT = $31,480 
Therefore, the dollar amount that must be deposited each year to achieve the objective is $31,480. The correct answer is B.

Zendor Company Wants to Have $200,000 Available in August 2021