Suppose that it is the morning following your 18th birthday. Also assume that every year starting with your 1st birthday, your grandfather deposited a fixed (constant) amount into an account that has paid 8% interest annually. The balance in the account is $200,000. What is the constant payment that your grandfather deposited on each birthday?
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To find the constant payment, we need to calculate the present value of the account balance. The present value is the current value of a future sum of money, taking into account the interest earned over time. The formula to calculate the present value is: Present Show more…
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