How much must you deposit at the end of each of the next 10 years in a savings account paying 5% annually in order to have $10,000 saved by the end of the 10th year?
A) $1,000
B) $1,638
C) $1,500
D) $795

Question

Quizplus · Accepted Answer

To solve this, we use the formula for the future value of an annuity: FV = P * [(1 + r)^n - 1] / r, where FV is the future value ($10,000), P is the annual payment, r is the annual interest rate (0.05), and n is the number of periods (10 years). Rearranging the formula to solve for P gives us the annual deposit required to reach the future value. Plugging in the values, we find that the correct answer is approximately $795.

How Much Must You Deposit at the End of Each