Mary and Joe would like to save up $10,000 by the end of three years from now to buy new furniture for their home. They currently have $1500 in a savings account set aside for the furniture. They would like to make three equal year end deposits to this savings account to pay for the furniture when they purchase it three years from now. Assuming that this account pays 6% interest, how much should the year end payments be? and please explain.. Thanks for your time

Answer 1

1500(1.06)^3 + paym(1.06^3 - 1)/.06 = 10000

paym(3.1836) = 10000 - 1786.52
payment = 8213.476/3.1836 = 2579.93