Answer to Question #166513 in Financial Math for Keegan Pereira

Question

If you wish to withdraw Rs. 50000, Rs 80,000, Rs. 110000 and Rs. 140000 at the end of 2nd, 3rd, 4th and 5th year from now from a savings accounts which earns 8% interest rate compounded annually, the amount you should deposit now is

Answer 1

$A=P(1+r/n)^(nt)$

To withdraw Rs. 50,000 at the end of 2nd year

$50,000=P(1+0.08)^2$

$50,000=1.1664P$

$P=50,000÷1.1664$

$P=Rs. 42,866.94$

To withdraw Rs. 80,000 at the end of 3 years

$80,000=P(1+0.08)^3$

$P=80,000÷(1.08)^3$

$P=Rs.63,506.58$

To withdraw Rs. 110,000 at the end of 4 years

$P=110,000÷(1.08)^4$

$P=Rs.80,853.28$

To withdraw Rs. 140,000 at the end of 5 yearsyears

$P=140,000÷(1.08)^5$

$P=Rs.95, 281.65$