Question 1075393: Sarah wants to save an amount of R100 000 in two years time. She wants to make a weekly payments into an account that offers an 8% yearly interest rate, compounded weekly. determine the size of the weekly payments.
Answer by jorel1380(3719)   (Show Source):
You can put this solution on YOUR website! We can use the formula for the future value of an ordinary annuity to calculate the amount needed for weekly deposits. Thus:
FVoa = PMT [((1 + i)^n - 1) / i] Where:
FVoa = Future Value of an Ordinary Annuity
PMT = Amount of each payment
i = Interest Rate Per Period
n = Number of Periods
Since the payments are weekly, as is the compounding period, we divide the relevant figures by 52. So, the interest rate is .08/52, or 0.00153846, and the number of periods is 2 years, or 104 weeks. So:
100000=PMT[1+.00153846)^104-1)/.00153846]
100000=PMT(112.68828721732060554879057909814)
PMT=R 887.404 per week. ☺☺☺☺
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