Problem

Find the periodic payment that will amount to the given sum under the given conditions. Round answe S=$90,000, interest is 4% compounded annually, payments made at the end of each year for 5 years

Answer

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Answer

S=$90,000

Steps

Step 1 ：Rearrange the formula for the future value of an ordinary annuity to solve for PMT: PMT=S∗r/[(1+r)n−1]

Step 2 ：Substitute the given values into the formula: PMT=$90,000∗0.04/[(1+0.04)5−1]

Step 3 ：Calculate the value: PMT=$90,000∗0.04/[1.2166529024−1]

Step 4 ：Simplify the equation: PMT=$90,000∗0.04/0.2166529024

Step 5 ：PMT=$16,594.89

Step 6 ：Check the answer: S=$16,594.89∗[(1+0.04)5−1]/0.04

Step 7 ：Simplify the equation: S=$16,594.89∗[1.2166529024−1]/0.04

Step 8 ：Calculate the value: S=$16,594.89∗0.2166529024/0.04

Step 9 ：S=$90,000

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