Asked by John

Melanie would like to have $25,706.30 in an ordinary annuity in 5 years. The annuity has a 10.8% annual interest rate, and she plans on making quarterly deposits. How much should she deposit per quarter?

Would this be the way I solve the question?

(1+.108/4)^5-1
[.108/4]
= .1424895016

.1424895016/( .108/4)

=5.277388946

25706.30 (5.277388946)
= 135662.14

Would 135662.14 be the answer?

Thanks!!!
Answered by Reiny
No, your exponent is incorrect
i = .108/4 = .027
but n = 5(4) or 20 periods

let the payment be P
P (1.027^20 - 1)/.27 = 25,706.30
P(26.06525..) = 25,706.30
P = $986.23

Why wouldn't your answer of $135,662.14 sound totally illogical to you??
You only wanted to accumulate $25,700, how could you possible make 20 payment of over $135,000 each ??
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