Deposits of $1000 are placed into a fund at the beginning of each year for the next 20 years. At the end of the 30th year, annual payments commence and continue forever. Interest is at an effective annual rate of 5%. Calculate the annual payment.
Added by Todd K.
Step 1
Using the formula for future value of an annuity, we have: FV = PMT x [(1 + r)^n - 1] / r where PMT is the annual deposit, r is the effective annual interest rate, and n is the number of years. FV = 1000 x [(1 + 0.05)^20 - 1] / 0.05 FV = 1000 x 45.259 FV = Show more…
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