To solve the problem using a finance calculator, you need to identify the correct values for N, PMT, i/y, FV, and PV based on the scenario.
Here’s the breakdown of the values:
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N (Number of periods): Since Derek will make 11 deposits, and the first deposit is made today, you will use N = 11.
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PMT (Payment per period): This is the amount Derek will deposit each year, which is $2,627.00. So, PMT = -2627 (it's entered as a negative number because it represents an outflow).
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i/y (Interest rate per period): The annual interest rate is 7.00%, so i/y = 7.
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FV (Future Value): This is what you are trying to calculate, so you leave this blank or enter 0.
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PV (Present Value): Since Derek is making deposits and you are calculating the future value based on these deposits, you can set PV = 0.
Now you can enter these values into the finance calculator:
- N = 11
- PMT = -2627
- i/y = 7
- FV = 0
- PV = 0
After entering these values, you can compute the future value (FV), which will give you the amount in the account 11 years from today. Keep in mind that some finance calculators might have different input methods, so be sure to consult the specific instructions for your calculator if the results seem off.
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