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Jones Stoneware has a liability of $75,000 due four years from today. The company is planning to make an initial deposit today into a savings account and then deposit an additional $10,000 at the end of each of the next four years. The account pays interest of 4.5 percent. How much does the firm need to deposit today for its savings to be sufficient to pay this debt

Answer :

Answer:

The deposit to be made today is $27,016.84  

Explanation:

The initial deposit the firm needs to deposit for its savings today can computed using financial function pv-present value.

The pv formula is given as PV(rate,nper,pmt,-fv)

rate is the return of 4.5% per year

nper is the number of years it take the savings to reach the target of amount of $75000,which is 4 years.

pmt is the periodic payment of $10000

fv is the target savings amount of $75000

Find the attached spreadsheet showing how the target savings has been computed

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