Question

Question:Assume the same situation as in Question 11, except that the four equal amounts are deposited at the beginning of the period rather than at the end. In this case, what amount must be deposited at the beginning of each period? (Round to two decimals.)

Short answer

The amount deposited each year is $39177

Step-by-step solution

Step-by-Step SolutionStep 1 Annuity definition

Annuity refers to the financial product which provides specific cash flows at regular intervals of time.

Calculation of amount deposited each year

$\begin{array}{rcl}\mathbf{Amount}\mathbf{}\mathbf{}\mathbf{deposited}\mathbf{}\mathbf{each}\mathbf{}\mathbf{year}& \mathbf{=}& \frac{\mathbf{Amount}\mathbf{}\mathbf{needed}}{\mathbf{Rate}\mathbf{(}\mathbf{future}\mathbf{}\mathbf{value}\mathbf{}\mathbf{of}\mathbf{}\mathbf{an}\mathbf{}\mathbf{ordinary}\mathbf{}\mathbf{annuity}\mathbf{}\mathbf{at}\mathbf{}\mathbf{10}\mathbf{\%}\mathbf{for}\mathbf{4}\mathbf{years}\mathbf{)}}\\ & \mathbf{=}& \frac{\mathbf{200000}}{\mathbf{4}\mathbf{.}\mathbf{64100}\mathbf{\times }\mathbf{1}\mathbf{.}\mathbf{10}}\\ & \mathbf{=}& \mathbf{\$}\mathbf{39177}\\ & & \end{array}$