SOLUTION: You would like to have $9000.00 in 8 years for a special vacation following graduation by making deposits at the end of each week in an annuity that pays 5% compounded weekly. How
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Question 1181686: You would like to have $9000.00 in 8 years for a special vacation following graduation by making deposits at the end of each week in an annuity that pays 5% compounded weekly. How much money should you deposit at the end of every week? (Do not round until final answer, and then round up to the next penny.) How much of the $9000.00 comes from deposits and how much comes from interest? Answer by ikleyn(52784) (Show Source):
This problem is about a weekly payment for Ordinary Annuity saving plan.
The formula for the Ordinary Annuity saving plan is
f = ,
f is the future value
p is the monthly payment
r is the interest rate per time period
n is the number of time periods.
In your problem:
time periods are weeks.
f = 9000
p = the weekly deposit amount, which you want to find
r = 0.05/12
n = 8 years * 52 weeks = 416 payment periods
formula becomes 9000 =
solve for p to get:
p = = 17.61 dollars.
You should deposit $17.61 weekly in order to have $9,000 in 8 years at 5% per year compounded weekly.
Your total direct deposit will be only $16.51*52*8 = 6868.16 dollars.
The rest is the interest which the account will earn.
