You’re prepared to make annual payments of $540 at the end of each year, into an...

Question

Question

You’re prepared to make annual payments of $540 at the end of each year, into an account that pays 14 percent interest compounded annually. How many payments will you have made when your account balance reaches $35,000?

business finance

Answer 1

Answer #1

Annual payment = $540
Desired balance = $35,000
Interest rate = 14%

Let it will take n years to reach the desired balance

$540 * FVA of $1 (14%, n) = $35,000

Using financial calculator:
I = 14%
PV = 0
PMT = -540
FV = 35000

N = 17.63

So, it will take 17.63 years or 18 years to reach the desired balance of $35,000

Answer 2

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