Answer to Question #213387 in Economics for jayesh

Question

Ahmad wants to deposit money for 5 consecutive years starting 4 years from now so she can withdraw $50,000 twelve years from now, Assume the interest rate is 10% per year. The annual deposit is closest to:(please answer correctly with Calculation because it is urgent)??

a. $5185

b. $5085

c. $5585

d. $5285

Answer 1

Using the formula for annuity payment:

$Pmt = (50,000/1.1^{12})×0.1×1.1^4/((1 - 1.1^{-5})×1.1^3) = 5,085.$

So, the correct answer is B.